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Totul la Imperativ. Excelena Voastr, Sir, Dorel Sticu M adresez domniei voastre cu rispettare profund i acelai sictir privind traiectoria domniei voastre profesionale: funcie de traseismul n politico pentru acelai scop: Proiecte i pstrarea n funcie: Centrul regionale pentru Finanarea Investiiilor Rurale 4 Sud-Vest Craiova Direttore Generale Aggiunto Dorel STICU Curriculum Vitae hellip Firmele Cartelului continu s se lupte ntre ele DUP ce au cunoscut prbuirea. Aciunile s-au mutat n Instan i SE joac pe bani de recuperat. Sumele sunt fabuloase i nu conteaz DAC mai recupereaz Ceva din ele. Conteaz execuia i cine un mrturisit fr s nu ho mai ADUC aminte, primete avertismentul: execuia n Instan hellip AFACEREA Terenuri PUNCTE TERMICE, DOSAR DISTINCT teren LA DNA onu cura Valora Sute de mii de euro a fost dat pe degeaba unui amic. Apoi Acesta l-un vndut i un bgat banii DIN vnzare n propriul buzunar. Dosar disjuns n acest caz. Este vorba Despre Modulo n cura acionarii firmei RP ar fi hellip Suspendat din funcie la nceputul anului 2016, Ortana Ciobanu un fost acuzat de procurorii DNA ST Craiova de savrirea infraciunilor de Luare de forma n mit continuat i fals n nscrisuri sub semnatur forma n privat continuat . Dosarul inculpatei sa aflat pe masa judecatorilor de la Tribunalul Olt timp de Cinci Luni, iar n 21 hellip Fostul condamnat pentru fapte de corupie n Primria Slatina, attuale incolpare i Trimis n judecat n Alte dou dosare, tot pentru fapte de corupie n Primria Slatina, fostul amministratore pubblico, viceprimar i Primar al Slatinei, Minel Florinel Prina, i scoate Palatul unde comisiona locuia ct, la vnzare. Suma este derizorie, COMPARATIVA cu opulena greu de hellip Cnd pe 8220duamna8220 tunat zdravn o ia cu clduri de la silicio, i Fuge MNA. Cel mai adesea pe telefon, ca s-i descarce curajul. Precum odinioar, n vremea lu tata Miu ef, pe reetele fittizia n reeaua farmaciilor ncercate. cura Drept pentru, din 8220extenuare8220, un schimbat, odat cu halatu i locul de Munc. Asta ca hellip Interpelat pe subiectul nominalizrii ministrului de Justiie, preedintele PSD Olt, senatorul Paul Stnescu un SPUS c opiunea sa este pentru un ministru politico, nu tehnocrat. n ce privete speculaiile privind opiunea Victor Ponta: 8220 personale voi vota mpotriva acestei nominalizri, dac EA va exista. Asta nu nseamn c Victor Ponta nu se poate regsi n Guvernul hellip Socialii democraii s-au ntrunit astzi n cadrul CEX PSD Olt pentru un situaia stagista analiza din partid i implementarea programului de guvernare. n Urma discuiilor au fost adoptate Trei rezoluii, aduse la cunotiina opiniei publice de preedintele executiv Marius Oprescu, prezent n cadrul conferinei de Pres susinut imediat DUP Edina CEX. Alturi de Marius Oprescu hellip Dup ncercarea de poleial fcut asear la prietenul dat n urmrire Naional, GhiTV, atept s-l vd pe Ponta scriindu-i rezist pe pagina de Facebook. Ar faccia orice s revin PSD vrful la. S-ar pupa i cu Bsescu i cu Johanis La Tribuna Senatului. Apariia lui Viorel la TV. La CEAS de Maxim audien, la doar hellip Aciunea este recente introdus n Contencios i SE fundamenteaz pe Legea 1881999, Legea funcionarilor publici. Cel mai probabil, subprefectul Ionu Cotarcea se plnge pentru neacordarea unor sporuri, cum ar fi cel de 'antenna, Sau prima de instalare, situaie ntlnit frecvent n aciunile instanelor de judecat. Ionu Cotarcea, de profesie avocat, un fost numit hellipBrazil: Ripristinare la crescita economica attraverso Economic Freedom Brasile: Ripristinare la crescita economica attraverso Economic Freedom selezionare una sezione 1 0 Toggle open close Abstract: il Brasile è il mondo il quinto paese più grande, latino-americano più grande economia, e un importante partner commerciale per gli Stati Uniti il ​​governo brasiliano domina molti settori dell'economia countrys, sottoquotazione sviluppo di un più vivace del settore privato, e del Brasile quattro anni di crescita medio del 4 per cento ha recentemente indebolita. la spesa pubblica consumano oltre il 40 per cento del PIL. Il ritmo di riforma della regolamentazione del Brasile ha subito un rallentamento, e la pressione fiscale è molto più pesante rispetto a molte altre economie emergenti. La corruzione è elevato, i diritti di proprietà private sono insicuri, e il sistema giudiziario rimane vulnerabile alle influenze politiche. Brasile ha bisogno di più libertà economica, e il governo dovrebbe eliminare gli ostacoli alla tasse activityburdensome imprenditoriali, regolamentazione inefficiente, difetti di finanziamento a lungo termine, e continuando rigidità creato dal governo nel mercato del lavoro. I mondi quinto più grande paese e latino americano più grande economia, il Brasile è un importante partner commerciale americano. L'economia brasiliana in media meglio di 4 per cento di crescita annuale 2006-2010 in gran parte grazie alla impennata dei prezzi delle materie prime esportate. Eppure, che il tasso di crescita è stata sostanzialmente inferiore rispetto a molti altri paesi emergenti più importanti, 1 e la crescita si è indebolita considerevolmente dal 2011. brasiliani sono giustamente preoccupati che il loro paese è diventato attaccato di nuovo nei decenni-vecchio ciclo di alta inflazione e la dipendenza delle materie prime da cui è emerso solo nel 1990. Rafforzare le basi della libertà economica è il passo critico necessario per ripristinare una crescita rapida. Il governo brasiliano continua a dominare molte aree dell'economia countrys, inferiori a sviluppo di un più vivace del settore privato. L'efficienza e la qualità complessiva dei servizi pubblici sono inadeguati, e il governo sembra essere più abili a raccogliere le tasse che ad attuare le riforme necessarie. spesa pubblica totale, tra cui i salari del settore pubblico e dei trasferimenti, consumano più del 40 per cento del prodotto interno lordo (PIL). Il ritmo generale di riforma della regolamentazione del Brasile ha subito un rallentamento, e la pressione fiscale è molto più pesante rispetto alle economie emergenti di Colombia, Perù e Messico. La corruzione è problematico, diritti di proprietà privata sono insicuri, e il sistema giudiziario rimane vulnerabile alle influenze politiche. Il Brasile è anche troppo dipendente dalle esportazioni di materie prime e rischia di essere afflitto dalla malattia olandese, 2 in cui i ricavi da risorse naturali rendono la moneta più forte, le importazioni più economiche, e prodotto prodotti più costosi. La crescita sostenibile richiede riforme interne per aumentare la produttività e la libertà economica. L'era delle materie prime-indotta di prosperità brasiliana è stata guidata principalmente dalla Cina. Se la Cina continua a salire per un altro decennio o più, il Brasile potrebbe diventare bloccati in una relazione di dipendenza, che dovrà rompere in seguito. In alternativa, Pechino deve affrontare anche le sfide dovute alla propria ricaduta sulla libertà economica di montaggio. Se la Cina inciampa prima il Brasile ottiene ordine in casa propria, il risultato sarà più doloroso. In entrambi i casi, del Brasile migliore risposta alla Cina è quello di diventare più competitiva e più innovativeto abbracciare una maggiore libertà economica. Mentre i progressi a guida Usa in tecnologie di perforazione e fracking orizzontali di auto verso il basso i prezzi del petrolio e rendono la produzione di Brazils abbondante, ma difficile da estrarre pre-sale di petrolio offshore sempre più problematica, del Brasile governmentliving nel pastis chiedendo royalties che sono troppo alti per pre - la produzione del sale di essere redditizia. Nel frattempo, un recente rapporto indica che il 40 per cento delle infrastrutture projectsin, alloggi, trasporti, e securitycurrently in corso da parte del governo brasiliano per prepararsi per i milioni di turisti che visitano il paese per la Coppa del Mondo 2014 e 2016 Olimpiadi di Rio non sono Presidente complete.3 Dilma Rousseff ha vinto la lode di recente in Brasile per prendere una linea dura contro corruption.4 Ma la sua risposta iniziale al Brazils attuali sfide economiche è stata quella di ricorrere al tipo di governo keynesiano stimolo spesa programs5 che non solo sono stati triedand avere failedin gli Stati Uniti e altrove, ma creerà anche una pletora di nuove opportunità per la corruzione cronyist. Invece, il suo governo dovrebbe fare le riforme strutturali dolorose per creare le condizioni per la crescita, in particolare nei settori non-commodity. Queste riforme dovrebbero essere guidati da ulteriori privatizzazioni, soprattutto nel settore delle infrastrutture, e riducendo le imposte gravose, regolamentazione inefficiente, ostacoli all'attività imprenditoriale, gli ostacoli al finanziamento a lungo termine, e le rigidità del mercato del lavoro. La base per il successo passato Come il professor Walter Russel Meade ha notato, il passato tormenta ancora il Brasile. Nonostante la sua enorme ricchezza di risorse naturali e capitale umano del paese ha subito innumerevoli espansioni e attraverso i secoli 19 e 20 ed era il bambino del manifesto di iperinflazione nel 1980 e 1990s.6 Di conseguenza, per molti decenni gli esperti hanno detto che il Brasile è il paese del futuro, e lo sarà sempre. Questa instabilità politica ed economica storica è cambiato, prima con il ritorno alla democrazia attraverso la costituzione del 1988, e poi con l'innovativo riforme delle politiche neoliberiste del Washington Consensusdaringly iniziata nei primi anni 1990 dal ministro delle Finanze (e più tardi presidente per due mandati) Fernando Henrique Cardoso. Questa nuova relativa stabilità è stato poi sorprendentemente rafforzato e potenziato dal Presidente populista-di sinistra Luiz Lula da Incio Silvaand così le riforme Washington Consensus finalmente ha rotto la parte posteriore del Brasile iperinflazione cronica e impostare la fase di crescita record. Le basi per la riforma fu posta nel 1985. Quando il presidente Jose Sarney inaspettatamente assunto la carica dopo la morte di Tancredo Neves, ha stabilito un forte sistema presidenziale esecutivo con poteri di emergenza per emanare leggi temporanei (medidas provisorias o deputati) che sono diventati cruciali per il funzionamento del governo. Così, anche se nessuno Sarneys eterodossa Plano Cruzado (che prevede la creazione di una nuova moneta, il Cruzado, finalizzato a ridurre l'inflazione), né il suo successore Fernando Collors più ortodosso Plano Cruzeiro (piani per una seconda moneta nuova, che non è riuscito anche a portare l'inflazione sotto controllo ) sono riusciti a sconfiggere l'iperinflazione, che ha raggiunto quasi 3.000 per cento nel 1990,7 paralizzare economicamente il Brasile, lo strumento deputato era a posto. Questo strumento assistito Cardoso nel lancio del successo Plano Real (il terzo, e, infine, il successo, l'introduzione del reale valuta) nel 1994, che fondamentalmente ristrutturato economia del Brasile. Cardoso ha pubblicato più di 300 parlamentari (e ri-emesso ulteriori 4.500) 8 per stimolare la privatizzazione e aprire Brasile per il commercio globale e gli investimenti. Una politica monetaria vigile, restrittiva, e indipendente supervisionato da ex banchieri internazionali neoliberiste e ancorata al dollaro americano da alti tassi di interesse reali permesso le regole economiche in Brasile per diventare più stabile e prevedibile. Gli investimenti diretti esteri in scorreva. Secondo il professor Albert Fishlow della Columbia University, l'agricoltura, l'estrazione, e nei settori del petrolio sono aumentate le esportazioni, mentre molte industrie statali e molto di infrastrutture di proprietà dello Stato sono state vendute a imprenditori privati ​​che potrebbero gestire in modo più efficiente. Il risultato è stato un settore industriale rianimato, è aumentato l'accesso al credito privato, l'elaborazione fallimento più efficiente, e un regime normativo più efficace. Nel frattempo l'economia del Brasile e la sua politica è diventato più stable.9 Brazils successo non sarebbe stato sostenuto senza Lulas impegno su assumendo carica nel 2003 per proseguire le politiche Cardosos, che egli riteneva all'epoca una politica oltre che una necessità economica, e di rispettare i termini di un Cardoso-era 30 miliardi bailout10 del Fondo monetario internazionale (FMI). Lula raccolto benefici politici diretti da attaccare con queste politiche pro-crescita. Brazils successiva prosperità abilitato Lula per aumentare la spesa sociale per l'istruzione, l'assistenza sanitaria, e altri programmi per oltre 11 milioni di famiglie che vivono in condizioni di povertà. Ad esempio, i finanziamenti per il trasferimento Lulas Conditional Cash programma (CCT) 11 Bolsa Familia (famiglia Stipend) è stato reso possibile solo attraverso i proventi fiscali generate da growth.12 economica del settore privato guidato Aiutato dal boom dei prezzi delle materie prime, Lulas precoce adesione al Cardosos riforme neo-liberali hanno amplificato la classe media brasiliana emergente, mentre anche sollevando le classi più povere. Ma negli ultimi anni della sua presidenza, Lula ha anche istituito politiche industriali neo-developmentalist13 sempre più assertivo e stataliste attraverso la Banca Nazionale per lo Sviluppo Economico e Sociale (BNDES) .14 Incolpare condizioni economiche globali, Lula progressivamente abbandonato gli sforzi precedenti al decentramento e il federalismo insito nella costituzione 1988 a favore di ricentralizzazione. La tendenza a arretramento verso lo statalismo in Lulas impostato secondo mandato il terreno per potenzialmente ripetere gli errori del passato, ricreando un governo centrale inefficiente e gonfio che interviene troppo sul mercato. La domanda ora è se il Presidente Rousseff farà crescita federalismo e del settore privato guidato una priorità di nuovo. Fishlow ha osservato che la nuova leadership necessaria in Brasile non dovrebbe venire dal governo federale, ma dai livelli statali e comunali come il potere è concentrato nelle mani di sindaci di importanti città e lo stato governors.15 Brasile contro la Cina:. Non seguire la Red BRIC strada nel corso degli ultimi cinque anni, la Repubblica Popolare cinese (RPC) è diventato socio del Brasile più grande di trading, così come un significativo partner di investimento. fortune Brazils si sono intrecciate con Cine, e le due sono comprensibilmente rispetto. Il PRC è innegabilmente il leader del ritmo di crescita economica, e alcuni vedono la Cina come un modello economico sostenibile per il Brasile. Questo punto di vista è gravemente fuorviante, però, e lo sviluppo in stile cinese avrebbe avuto brutte conseguenze per il Brasile. Diciannove cento novantuno è stato l'ultimo anno completo della repressione politica ed economica nella RPC che ha seguito il giro di vite dopo le manifestazioni di piazza Tiananmen nel 1989. A quel tempo, il Brasile era otto volte più ricchi della Cina e più grandi in termini aggregati. Nel 1992, il segretario generale del partito comunista, Deng Xiaoping, riavvio riforma economica cinese. Venti anni più tardi, la Cina è tre volte e mezzo più grande di Brasile in termini aggregati, e il Brasile è inferiore a due volte più ricco. La storia della recente performance di crescita positiva PRCs è ben noto, ma è stato male interpretato. Cine successo non deriva degli ultimi otto a nove anni di intervento del governo, che ha portato solo per gli squilibri macroeconomici e insostenibilmente alti liquidity16 simili a problemi visti per l'economia americana negli ultimi dieci anni. Il successo PRCs deriva dagli anni di riforma del mercato del 1978 al 1989 e 1992-2002, che si conclude con l'ingresso nell'Organizzazione mondiale del commercio (OMC). A partire dal 2002, il PRC non aveva squilibrio macroeconomico e nessun eccesso di liquidità, e la sua economia è strutturalmente indebolita dal 2006. Come si continua a farlo, l'equivoco del ruolo di uno stato in espansione in attività di mercato sta finalmente cedendo il passo allo scetticismo su Cine prospettive a lungo termine di riforma assente. i politici brasiliani non dovrebbero essere ingannati da pretese di statalista superiority.17 Cine rapida crescita non, tuttavia, hanno importanti implicazioni per le relazioni bilaterali. L'espansione PRCs e conseguente domanda di materie prime che manca, come il minerale di ferro, soia, petrolio greggio e gas naturale, ha tirato Brasile along.18 Ma mentre la competitività brasiliano agricola, depositi di metallo, e ampliando il ruolo di energia sono stati una manna in Cina, certamente non guidare la crescita cinese. Piuttosto, l'espansione della Cina ha spinto la crescita del Brasile. Se la Cina inciampa, la sfida per il Brasile sarà quello di trovare fonti di crescita che non si basano su transitorio domanda esterna. Del Brasile risorsa dotazione è un vantaggio, ma che cresce e decresce con cicli globali. Il miglioramento della produttività del lavoro domestico e del capitale attraverso la riforma è una spinta permanente, non una transitoria. Mentre la Cina si dissolve in questo scenario, più libertà economica potrebbe rendere il Brasile la nuova Cina, solo più ricco. D'altra parte, se la Cina fa rivivere la sua economia, sarà dovuto alla rinnovata riforma volta a conseguire una maggiore libertà economica, come Deng accettato nel 1978 e ri-avviato nel 1992. rinnovata riforma e l'efficienza cinese avrebbe tagliato la domanda di alcuni prodotti brasiliani, come il minerale di ferro, ma le merci del gas e agricoli sarebbe rimanere forte, sulla base della domanda dei consumatori cinesi di cibo di qualità superiore e improvements.19 ambientale la domanda è se questo è sufficiente. Dovrebbe essere il Brasile seguente contenuto nel Cine scia, anche se la RPC può salire per un altro decennio o più No, il Brasile può fare meglio. Non c'è scelta necessaria per fare tra un commercio enorme e rapporto di investimento con una vivace la Cina e una maggiore libertà economica. riforma del mercato basata renderà il Brasile più competitiva e più innovativa, più in grado di sfruttare i punti di forza Cine, e maggiormente in grado di competere con la Cina. La convinzione che il Brasile deve limitare la libertà economica per competere con la RPC si sbaglia. il sostegno dello Stato per le industrie nel tentativo di garantire la loro competitività nei confronti cinesi o di altre imprese ha un costo per il resto della società. Il PRC ha pagato quel prezzo in degrado ecologico, aumento disparità di reddito, e gli squilibri economici che devono infine essere corrected.20 Brasile può imitare cinese di pianificazione per un tempo top-down, ma pagherà un prezzo elevato. Nel frattempo, la riforma basato sul mercato per migliorare la produttività dei lavoratori brasiliani e ampliare il raggio d'azione per le società brasiliane migliora la competitività e non costa nulla. Maggiore efficienza minimizza la minaccia per l'ambiente, riducendo al minimo l'esaurimento delle risorse. Un open Brasile integrata con l'economia mondiale è in una posizione migliore per trarre il massimo vantaggio della domanda globale per le sue risorse, piuttosto che affrontare una rappresaglia per il suo protezionismo e l'esclusione da accordi commerciali preferenziali. Una più aperto Brasile premierà agricoltori Brazils, minatori e lavoratori di energia, alleviare le disparità di reddito. Brasile deve rispondere a una Cina successo allo stesso modo sarebbe un insuccesso China: con più libertà economica. Del 2012 Index of Economic Freedom, 21 pubblicato dalla Heritage Foundation e dal Wall Street Journal. fornisce alcune prospettive importanti riforme del Brasile più necessaria. Brazils punteggio complessivo libertà economica è 57,9 su 100, rendendo la sua economia più libera 99a di 179 paesi nell'Indice del 2012. Il suo punteggio è di solo 1,6 punti in più rispetto al 2011, con miglioramenti in solo quattro delle libertà economiche 10. Il Brasile è classificato 20 ° su 29 paesi del Sud e Centro America e il regime dei Caraibi, e il suo punteggio complessivo è inferiore alle medie regionali e mondiali di 60 e 59,5, rispettivamente. In ogni area della libertà economica c'è spazio per un miglioramento significativo. Protezione dei diritti di proprietà. Tutti i contratti in Brasile sono generalmente considerati sicuri, ma Brazils giudiziario è inefficiente e soggetto a influenza politica ed economica. E 'anche sotto-di risorse rispetto ad altri ministeri del governo e del suo personale manca una formazione adeguata. decisioni della Corte possono richiedere anni per essere tramandata, e sentenze di primo livello Supremo Tribunale Federale non sono vincolanti automaticamente corti inferiori. Nel 2011, il Dipartimento di Stato ha riferito che i tribunali sono stati invasa da casi di diritti di proprietà e che l'arretrato stava crescendo larger.22 In un 2009 di valutazione del Brasile condotto dal gruppo anti-corruzione globale integrità, le piccole imprese hanno riferito che spesso non possono permettersi i costi di un lawsuit.23 mondo Banche International Finance Corporation ha rivelato nel suo 2009 Enterprise Survey che quasi la metà delle piccole e medie aziende in Brasile considerano il funzionamento dei tribunali un vincolo importante per fare affari in tribunali country.24 ai livelli più bassi sono particolarmente inclini alla corruzione, influenza politica, e intimidation.25 e 'di vitale importanza per la crescita economica del Brasile sana che le persone, sia nativi e stranieri, in grado di acquistare e vendere beni immobili facilmente, con bassi costi di transazione. mercato dei mutui del Brasile è ancora poco sviluppato e stranieri, in particolare, possono incontrare difficoltà ad ottenere finanziamenti ipotecari. La tutela dei diritti di proprietà intellettuale è migliorata, ma la pirateria di materiali protetti da copyright persiste. Libertà dalla corruzione. La corruzione è spesso un ostacolo agli investimenti in Brasile. Le aziende che concorrono in materia di appalti pubblici possono incontrare la corruzione, che è anche un problema con i giudici di merito. Nel 2010, le indagini di corruzione di politici di partiti di opposizione e di governo della coalizione hanno comportato pene detentive per due governatori. Da allora, anche scandali di più alto profilo sono venuti alla luce. Tra giugno e settembre 2011 il presidente Dilma Rousseff ha perso cinque funzionari di livello gabinetto, nessuno che affrontare accuse penali, ma quattro dei quali hanno lasciato dopo le accuse di corruzione sono state comminate contro them.26 corruzione ostacola anche le operazioni quotidiane delle aziende, sia brasiliana e straniera Di proprietà. Un sondaggio 2008 Business commissionato dal norvegese Ministero degli Affari Esteri, la collaborazione su anti-corruzione: la Norvegia e il Brasile, ha trovato una generale mancanza di fiducia nel sistema giudiziario che rende le aziende riluttanti a presentare denunce ai tribunali in situazioni in cui sono stati vittime di corruzione. Secondo l'indagine, reclami ai tribunali è considerato uno spreco di tempo e denaro, la maggior parte degli intervistati. Quindi, molte aziende rimangono in silenzio su atti di corruzione commessi contro di loro, anche se tali crimini sono costati loro importante contracts.27 fiscale Libertà. Anche se l'economia del Brasile mostra una grande promessa per passare dall'economia 10 ° più grande al mondo per la quarta più grande entro il 2050, deve ancora superare le sfide enormi e ridurre regolamenti gravosi e aliquote d'imposta al fine di realizzare pienamente il suo potenziale. Il governo Rousseff dovrebbe cercare di diventare più competitivi, migliorando il punteggio del Brasile in materia di libertà fiscale. Il raggiungimento di questo obiettivo non sarà facile. Come San Paolo avvocato Raffaele de Neto ha detto a The Economist. I governi capacità brasiliano di raccogliere le tasse ha eseguito molto più avanti di ogni sforzo per snellire loro, aumentando il carico di lavoro businesses.28 La parte superiore aliquota dell'imposta sul reddito personale è 27,5 per cento. L'aliquota dell'imposta sulle società standard è del 15 per cento, che quando combinato con un 10 per cento addizionale e il 9 per cento il contributo sociale sull'utile netto pagato dalla maggior parte delle industrie porta il tasso effettivo al 34 per cento. Altre imposte includono una tassa sulle transazioni finanziarie, con la pressione fiscale complessiva pari al 34,3 per cento del reddito nazionale totale. La spesa pubblica è più di un terzo del PIL, con conseguente deficit di bilancio croniche. Il debito pubblico è 66.18 per cento degli ambienti fiscali GDP.29, accoglienti per le imprese può contribuire a condurre ad un aumento degli investimenti diretti esteri (IDE). Questo è di particolare interesse per il Brasile in quanto di IDE afflussi verso il Brasile sono diminuite del 42 per cento anno su anno, per USD25.9bn nel 2009, giù da afflussi record alto di US45.05bn a 2.008,30 Tra l'altro, il Brasile richiederà enormi quantità di investimenti diretti esteri e l'accesso alle tecnologie avanzate al fine di estrarre i 80 miliardi a 100 miliardi di barili di greggio dolce luce che si pensa di stare in mare aperto sotto i cinque miglia di acqua dell'oceano e un miglio supplementare o due di pre-sale della roccia al di sotto del Sud Atlantico . Così com'è oggi in Brasile, depositi fiscali non sono solo finanziariamente costosa, ma il tempo necessario per completare depositi fiscali ha anche un ulteriore impatto negativo. Per i manager di business, il tempo è denaro. La struttura fiscale complessa consuma circa 2.600 ore all'anno per le aziende di medie dimensioni locali, secondo l'International Finance Corporations e World Banche annuale Doing business sondaggio. Ciò è dovuto principalmente alle imposte, come l'imposta sul reddito delle società del Brasile (IRPJ), contributi sociali (dell'INSS), e le imposte sui beni e servizi (ICMS) che sono simili a taxes.31 a valore aggiunto rispetto, Doing Business riferisce che la Cina ha adottato misure per migliorare l'ambiente fiscale con la nuova legge sul reddito aziendale che ha unificato i regimi fiscali per le imprese nazionali ed estere e chiarito il calcolo del reddito imponibile d'impresa purposes.32 imposte sul reddito del Brasile svantaggio nella competizione mondiale per gli IDE è stato notato da dirigenti aziendali. Questi leader aziendali a comprendere che la struttura fiscale vigente in Brasile è troppo complicato. Commentando sulla tassazione del Brasile regime normativo Mark Buthman, direttore finanziario per KimberlyClark, ha detto che se la sua non è il sistema fiscale più complicato del mondo, la sua certamente fino there.33 Tarek Farahat, CEO di Procter Gamble amp Brasile, ha espresso simile preoccupazioni, affermando che il Brasile ha bisogno di semplificazione fiscale. Questo porterà la trasparenza e la competitività e porre le basi per la spesa growth.34 governo sostenibile. Durante l'anno più recente, la spesa pubblica totale, compreso il consumo e il trasferimento dei pagamenti, pari a 41 per cento del debito pubblico PIL è appena al di sotto del 40 per cento del PIL. Oltre a servizio del debito, la spesa pubblica è focalizzata principalmente sulle pensioni, i trasferimenti agli enti locali, e il finanziamento della burocrazia. i salari del settore pubblico e dei trasferimenti rappresentano oltre il 70 per cento dei countrys spesa primaria. Entrambi del settore privato e del settore pubblico pensioni in Brasile sono tra i più generosi al mondo, sostituendo in media il 75 per cento del reddito pre-pensionamento. Alcune di queste pensioni sono pagati per i più poveri e hanno lo scopo di ridurre la povertà. In generale, comunque, i lavoratori rurali di età superiore ai 60 anni, e chiunque povero e più di 65 anni, può ottenere una pensione di 622 realsthe wagewithout minima aver mai versato il system.35 Anche se questa disposizione è relativamente basso in termini di costi di bilancio per la percentuale del PIL government2 ogni anno i più grandi problemi che crea, quelle che condivide il Brasile con de facto welfare in fallimento, come la Grecia, derivano da regole che permettono di contribuire ai lavoratori di andare in pensione prima, con pensioni più grandi, rispetto a quasi qualsiasi altra parte del world.36 Dato che serie di incentivi anticoncorrenziali e, in definitiva fiscalmente insostenibili, forse non è sorprendente che la maggior parte dei brasiliani in pensione sorprendentemente precoce: il maschio medio nel settore privato è di 54 la donna media, i benefici 52. superstiti non hanno limiti di età. Per rendere Brazils passività non finanziate di rivendicazione della titolarità ancora più scoraggiante, c'è anche una disposizione che consenta alle famiglie di ereditare il 100 per cento della pensione di un capofamiglia deceduto, il che significa che anche i giovani, le vedove senza figli non hanno bisogno di lavoro. Oggi in Brasile completamente un decimo di tutti i 45 anni di età sono già ricevendo pensions.37 business Libertà. Per diventare più competitiva a livello mondiale, il Brasile dovrebbe eliminare gli ostacoli all'attività imprenditoriale, ad esempio, la riduzione del numero di procedure, il numero di giorni, e il costo associato con l'ottenimento di una licenza commerciale. Anche se il governo brasiliano ha preso alcune misure nel 2011 per facilitare i costi di start-up aziendali, migliorando il grado di sincronizzazione elettronica tra le autorità fiscali federali e statali, secondo il Doing Business, 38 è in nessun posto vicino i primi 10 riformatori in libertà business a livello globale. Nel 2011, il governo della vicina Perù ha reso molto più facile avviare un'impresa, ottenere i permessi di costruzione, catasto, e gli scambi transfrontalieri. Perù facilitato il processo di avvio di un'impresa semplificando i requisiti per le licenze di esercizio e la creazione di un one-stop shop on line per registration.39 business in Brasile ci vogliono 13 procedure, 119 giorni, e circa il costo di 5,4 per cento del reddito pro capita40 a iniziare un attività. In Nuova Zelanda, ci vuole solo un procedimento e un giorno per iniziare un company.41 Anche punteggi Cina leggermente betterstarting un business ci vogliono 14 procedure, 38 giorni, al costo di 3,5 per cento di income.42 Lavoro Libertà. mercato del lavoro rigido del Brasile è un ulteriore livello di oneri normativi sul countrys settore privato che influisce negativamente la sua capacità di competere per una classifica stellare in libertà economica. Soffocanti normativa del lavoro continuano a minare l'occupazione e la crescita della produttività. Brazils punteggio libertà del lavoro cade nella metà inferiore della classifica mondiale. Il costo non salariali di impiegare un lavoratore è elevato, e che respinge un dipendente ridondante può essere costoso a causa delle norme imposte dal governo in materia di separazione e il licenziamento. benefici Mandated amplificano i costi complessivi del lavoro. Come risultato, il settore informale rimane considerevole. Come il Wall Street Journal s San Paolo corrispondente Paolo Prada ha riferito, del Brasile ambiente di business restrittivo e rigido codice del lavoro indietro al 1940 e sono stati originariamente modellata sulle politiche stataliste di Mussolini.43 Il risultato, tragicamente per le persone in Brasile che sarebbe aspirare per il tenore di vita della classe media, è che gli alti costi generati da queste politiche retrograde ostacolano aziende provenienti da nuove assunzioni, intrappolando così molti aspiranti proprietari di piccole imprese, operai, artigiani e lavoratori autonomi nelle ombre della economia informale. Come riportato The Economist: che molti dei nuovi posti di lavoro sono formale (cioè legalmente registrati) è nonostante, piuttosto che a causa delle leggi del lavoro. La tendenza alla formalizzazione, soprattutto a causa della maggiore disponibilità di credito bancario e capitale da un lato, e modifiche recenti che semplificano al registro microimprese dall'altro. E coesiste con due punti deboli del Brasile di vecchia data: un elevato turnover del lavoro e bassa produttività growth.44 monetario Libertà. Il tasso medio di inflazione è stata del 5,2 per cento nel mese di agosto 2012.45 politiche fiscali e monetarie prudenti aiutato il Brasile evitare il peggio della crisi finanziaria globale del 2008 e il 2009, anche se la sua economia in forte espansione (guidato da forti esportazioni di materie prime) in ultima analisi, può costringere le autorità a ricorrere a monetaria serraggio per ridurre future pressioni inflazionistiche. Anche se tali servizi pubblici come le ferrovie, le telecomunicazioni, l'elettricità e sono state privatizzate, agenzie di regolamentazione sorvegliano i prezzi. L'Agenzia National Petroleum fissa il prezzo all'ingrosso del carburante e il governo controlla tariffe aeree. Il regime fiscale per la produzione di petrolio comprende, oltre a royalties, una tassa speciale di partecipazione (PE). Questa tassa protegge il governo dal underpayment dalle aziende che scoprono grandi volumi di idrocarburi. Ha un tasso progressivo, che vanno dal 10 per cento al 40 per cento, a seconda del volume prodotto, la profondità dell'acqua, la posizione del campo, le entrate produzione netta, e il tempo di production.46 Commercio libertà. Paulo Prada riassume ordinatamente Brazils libertà commercio sfida così: per osservatori casuali, le cose appariranno meglio come il Brasile si prepara per ospitare calciatori della Coppa del Mondo nel 2014 e le Olimpiadi di Rio de Janeiro nel 2016. Nuove strade e terminal aeroportuali saranno battezzate insieme stadi modernizzato e panoramici, passeggiate ben sorvegliati-. Ma i produttori, esportatori e shipperswho regolarmente aspettare giorni o settimane per ritardi nei porti e strutture doganali di clearknow Brasile ha bisogno di più changes.47 solo estetico Secondo la Banca Mondiale, del Brasile tariffario ponderato su base commerciale media nel 2009 e nel 2010 è stato 8,7 per cento. 48 l'aumento affidamento su barriere non tariffarie e l'uso di misure antidumping è un motivo di preoccupazione. Nel settembre 2011, il Brasile schiaffeggiato una tassa antidumping sui prodotti siderurgici provenienti dalla Cina, uno dei suoi più vicini commercio partners.49 investitori stranieri fruiscono del trattamento nazionale (lo stesso trattamento che ricevono investitori nazionali), ma la loro attività è limitata in alcuni settori, incluse le comunicazioni e le miniere. Il settore bancario è emerso relativamente indenne dalla crisi globale, con i crediti al settore privato è aumentata. I divieti di importazione e le restrizioni, le barriere di accesso al mercato dei servizi, le tasse di confine e tasse, regole restrittive normative e di licenza, sovvenzioni, procedure doganali complesse, e la protezione problematica dei diritti di proprietà intellettuale aggiungere al costo del commercio. Libertà di investimento. Nonostante alcuni progressi, nuovi investimenti e la produzione rimane ingombrante e burocratico. Gli investitori stranieri fruiscono del trattamento nazionale, ma gli investimenti stranieri è limitato nei settori delle comunicazioni, dei trasporti, e minerarie. In generale, i cittadini brasiliani devono costituire almeno i due terzi di tutti i dipendenti e di ricevere almeno due terzi della massa salariale nelle imprese che impiegano tre o più persone. Il contesto fiscale e regolamentare è gravoso, e controversie legali può richiedere molto tempo. Ci sono alcune restrizioni sulle transazioni in valuta estera. Gli investitori stranieri, al momento della registrazione i loro investimenti con la banca centrale, possono rimettere i dividendi, capitale (comprese le plusvalenze), e royalties. La banca centrale regola investimenti diretti all'estero, in alcuni casi, compresi i trasferimenti e le rimesse. Gli investitori stranieri devono ottenere una specifica autorizzazione per l'acquisto di terreni lungo i confini. Brazil should privatize state-owned enterprises, such as Petrobras, and open Brazil to more foreign equity participation to develop its rich resources and improve its score in the Index of Economic Freedom . Petrobras will need significant funding in order to develop the billions of barrels of pre-salt oil and natural gas that lie beneath as many as 10 kilometers of water, rock, and salt under Brazils South Atlantic continental shelf. Despite its profitability and high market value, states The Economist . the company lost some US50bn in market value in JanuaryAugust 2010 due to rising debt levels, although by May 2012 oil output was back up.50 Recently, Petrobras increased its five-year investment planalready the worlds largest corporate spending programto 237 billion.51 Yet Dr. Susan Kaufman Purcell, director of the Center for Hemispheric Policy at the University of Miami, recently noted that the Brazilian government is living in 2008, not 2013, when it comes to its policies to develop these pre-salt reserves. The biggest game-changer has been the tremendous U. S.-led advances in horizontal drilling and fracking technologies to extract oil from shale, which have reduced the estimated cost of producing a barrel of oil from shale to 70which is less than the cost of producing a barrel of oil from Brazils pre-salt reserves, which some analysts have placed at over 100 per barrel. Furthermore, shale exists in abundance. The largest deposits are in the United States, whose production of crude oil has increased 15 percent since 2008, making it the worlds fastest-growing oil and natural gas producer. The U. S. Energy Department projects that the daily U. S. output of oil could reach almost seven million barrels per day by 2020. Others think that it could ultimately hit 10 million barrels per day, which would place the United States in the same league as Saudi Arabia. Brazil currently produces about 2.5 million barrels per day of oil. The accessibility of oil from shale means that there will be abundant oil for years to come. This also means that world oil prices will continue to decline. Given this situation, Brazil needs to quickly begin reducing the cost of producing its pre-salt oil. Unfortunately, Brazil is going in the wrong direction, as the government continues to insist on demanding a high percentage of local content in the production of ships, drills and other assets needed to exploit its pre-salt reserves.52 In another sign of trouble for Brazil, new foreign investment in Brazilian equities plunged 70 percent in the first half of 2011, dragging down what had been one of the worlds most attractive markets for global investors.53 Although by December 2011 foreign investment had rebounded somewhat, a large portion of that new investment came from China Petroleum amp Chemical Corp. s purchase of a 40 percent share in Repsol, a domestic oil producer.54 In general, rising inflation, political interference in key sectors, and measures that slowed down credit growth have all dampened foreign investor sentiment toward Brazils equity market, forcing some companies to put off the initial public offering (IPO) of stock despite the overall strength of the countrys economy.55 Financial Freedom. Overall, Brazils well-regulated and supervised banking sector withstood the global financial turmoil of 2008 relatively well, and has expanded. It has become more competitive and diversified, although the states role remains significant. Loans to the private sector have steadily increased, with solid economic expansion and the formation of a new lower middle class. Public-sector commercial and development bank assets account for around 40 percent of the financial systems total assets. The two largest state-owned banks control about 25 percent of total assets, and the government directs banks to channel loans to preferred sectors. Three of the top 10 banks are now foreign-owned. Brazils insurance sector is now South Americas largest, and the reinsurance market was opened to private-sector competition in 2008. The domestic insurance and pension-fund sectors are important institutional investors in local capital markets. The sector is expected to continue to deepen as the domestic economy expands and real incomes of the middle class rise. The operating networks of non-bank financial institutions, however, continue to be underdeveloped. According to the World Economic Forums 2011 Global Competitiveness Report56 Brazil improved five places to rank 53rd overall due in part to having one of the worlds most efficient financial markets (40th place) and one of the highest rates of technological adoption (47th place) and innovation (44th place) in Latin America and the Caribbean. In order for the middle class in Brazil to grow, and entrepreneurs to succeed in starting and growing small and medium-sized businesses, the Brazilian government must reverse the countrys inadequate mechanisms for long-term financing. Public-sector bank assets accounted for 41.5 percent of total banking assets at end-June 2010, according to the central bank ( Banco Central do Brasil ).57 Despite the surge in lending by state-owned banks, the private sector still lacks access to long-term financing opportunities. The average annual market rate on bank loans was 35.4 percent in July 2010, significantly higher than the subsidized long-term interest rate (TJLP) of 6 percent.58 Despite well-intentioned efforts, the Brazilian Development Bank (BNDES) may very well be encouraging mal-investment and distorting market signals. BNDES enjoys preferential access to lower interest rates, cheaper credit, and government backing that private banks do not. Thus BNDESbacked by the deep pockets of the governmentthreatens to monopolize the credit market and obstruct competition among private free-market banks. This obstruction inhibits the only effective way to ensure optimal credit allocation.59 The rise of BNDES under Lula and Rousseff is fraught with moral hazard, not unlike the one in the United States involving U. S. government-sponsored enterprises (GSE) and mortgage industry heavyweights Fannie Mae and Freddie Mac. Conclusion Brazils progress the past two decades led Goldman Sachss Jim ONeill10 years after including Brazil in his BRICs formulation in 2001to conclude that his big, bold bet to include Brazil in the BRICs had been vindicated.60 Brazilians were finally going to shake off their old habits and turn their country into a world-class power. Notwithstanding ONeills cheery assessment in 2011, however, there have been numerous negative developments since Dilma Rousseff took the reins from Lula that same year. Stalling economic growth, higher inflation, growing regulation, and possible moves toward renationalization of some key sectors of the economy (such as mining and energy production), as well as numerous government corruption scandals, are raising old questions. Is Brazil back sliding Can Brazil ever permanently escape from its perennial trap of high inflation, due in part to the Dutch disease of overdependence on commodity exports Is Brazil fated to be the perennial country of the future As ONeill himself notes, If we look back 100 years, the majority of the successful world economies were not tied to commodities.61 Brazil needs to shake itself loose from its dependence on exporting commodities to China, no matter what happens with the PRCs own economic development. Chinas current statist model should not be emulatedit is Chinas earlier market-reform era that should be emulated. President Rousseffs government should implement the necessary structural reforms to spur growth in non-commodity sectors by further privatization (especially in infrastructure) and by eliminating barriers to entrepreneurial activity, burdensome taxes, inefficient regulation, flaws in long-term financing, and rigidities in the labor market. - James M. Roberts is Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics (CITE), Mark J. Schreiber is Associate Director for Strategy and Finance, and Derek Scissors, Ph. D . is Senior Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation. CITE Research Assistant Ryan Olson and CITE intern Dylan DelliSanti made valuable contributions to this paper. 1 Such as the other so-called BRIC countries (Brazil, Russia, India, and China) and other large developing countries, such as Indonesia and South Africa. 2 In the 1960s, the Netherlands discovered large natural gas deposits. This ostensibly positive development had serious repercussions for important segments of the economy, as the Dutch guilder became stronger, making Dutch non-oil exports less competitive. This phenomenon has come to be known as the Dutch disease. Christine Ebrahim-zadeh, Back to Basics, International Monetary Fund Finance and Development . Vol. 40, No. 1 (March 2003), imf. orgexternalpubsftfandd200303ebra. htm (accessed August 7, 2012). 3 AQ and Efecto Nam Joint Report: Is Brazil Ready for the Olympics Americas SocietyCouncil of the Americas, August 5, 2012, as-coa. orgarticlesaq-and-efecto-naC3ADm-joint-report-brazil-ready-olympics (accessed August 16, 2012). 5 Mamta Badkar, Brazils 66 Billion Stimulus Could Signal a Shift in Its Growth Strategy, Business Insider , August 15, 2012, businessinsiderbrazil-66-billion-dollar-stimulus-2012-8 (accessed August 16, 2012). 8 Albert Fishlow, Starting Over: Brazil Since 1985 (Washington, DC: Brookings Institution, 2011), p. 9. 10 Lourdes Sola, Politics, Markets, and Society in Lulas Brazil, Journal of Democracy . Vol. 19, No. 2 (2008), pp. 3234. 11 The World Bank, Conditional Cash Transfers: Key Facts, 2011, web. worldbank. orgWBSITEEXTERNALTOPICSEXTSOCIALPROTECTIONEXTSAFETYNETSANDTRANSFERS0,,contentMDK:20615138 theSitePK:282761,00.html (accessed June 20, 2012). 12 Sola, Politics, Markets, and Society in Lulas Brazil. 13 Neo-developmentalism was first used in 2003 by Brazilian economist and former policymaker Luiz Carlos Bresser-Pereira in an attempt by statists to oppose the neo-liberal policies of the Washington Consensus. See A New Developmental State Heterodox Political Economy Blog . April 14, 2012, europeaneconomics. wordpress20120424a-new-developmental-state (accessed August 8, 2012). 14 Mara de Lourdes R. Mollo and Alfredo Saad-Filho, Neoliberal Economic Policies in Brazil (19942005): Cardoso, Lula and the Need for a Democratic Alternative, New Political Economy . Vol. 11, No. 1 (2006), p. 117. 15 Fishlow, Starting Over: Brazil Since 1985 . 16 Derek Scissors, China Drowning in Money: What It Means for the U. S., Heritage Foundation Issue Brief No. 3616, May 29, 2012, thfmedia. s3.amazonaws2012pdfib3616.pdf . 18 Brazil Sets Trade Records, Due to Chinese Demand, NPR, January 2, 2012, npr. org20120102144587105brazil-sets-trade-records-due-to-chinese-demand (accessed August 8, 2012), and John Whalley and Dana Madianu, The Deepening China Brazil Economic Relationship, CESIFO Working Paper No. 3289, December 2010, cesifo-group. deportalplsportaldocs11183998.PDF (accessed August 8, 2012). 19 Leslie Hooks, China: Beijing Will Drive Global Natural Gas Demand, The Financial Times . December 20, 2011, and Jikun Huang, Feeding Growing Food Demand in China, presentation at SAIS conference, Washington, DC, April 17, 2012, sais-jhu. eduagriculturePresentation201Jikun20HuangChina. pdf accessed August 8, 2012). 21 Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2012 Index of Economic Freedom (Washington, DC: The Heritage Foundation and Dow Jones amp Company, Inc. 2012), pp. 121122. 22 U. S. Department of State, Background Note: Brazil, November 30, 2011, state. govrpaeibgn35640.htm accessed August 8, 2012). 24 The World Bank, Enterprise Surveys: Brazil, 2009, enterprisesurveys. org accessed June 21, 2012). 27 Tina Sreide and Claudio Weber Abramo, Collaboration on Anti-Corruption: Norway and Brazil, Chr. Michelsen Institute CMI Report No. 2008:1, 2008, cmi. nopublicationsfile2935-collaboration-on-anti-corruption-norway-and-brazil. pdf accessed August 8, 2012). 29 International Monetary Fund, World Economic Outlook Database, April 17, 2012, imf. orgexternalnscs. aspxid28 accessed August 8, 2012). 30 Brazil Investment Regulations, Economist Intelligence Unit, October 4, 2011. 31 Doing Business, Ease of Doing Business in Brazil, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomiesbrazil accessed August 8, 2012). 32 Doing Business, Ease of Doing Business in China, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomieschina (ccessed August 8, 2012). 33 Kate OSullivan, Brazil is Booming (and Maddening), CFO Magazine . July 15, 2010, cfoprintablearticle. cfm14508833 (accessed August 8, 2012). 34 Jonathan Wheatley and John Paul Rathbone, Brasileiros no parecem desejar mudanas polticas, mas empresrios esto preocupados (Brazilians Do Not Seem to Want Political Change, But Employers are Concerned), in Portuguese, UOL, January 10, 2010, wap. noticias. uol. brmidiaglobalfintimes20101001brasileiros-nao-parecem-desejar-mudancas-politicas-mas-empresarios-estao-preocupados. htm (accessed July 5, 2012). 35 Tick, Tock: The Senate Debates a Small Measure to Help Disarm an Economic Time Bomb, The Economist . March 24, 2012, economistnode21551093 (accessed August 20, 2012). At the March 2012 exchange rate, 622 reals were worth about USD300. 38 Doing Business, Economy Rankings: Ease of Doing Business in Brazil, 2012, doingbusiness. orgrankings (accessed August 8, 2012). 40 Doing Business, Ease of Doing Business in Brazil. 41 Doing Business, Ease of Doing Business in New Zealand, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomiesnew-zealand (accessed August 8, 2012). 42 Doing Business, Ease of Doing Business in China. 46 Monica Rebelo Rodriguez and Saul B. Suslick, An Overview of Brazilian Petroleum Exploration Lease Auctions, Terrae . Vol. 6, No. 1 (2009), pp. 620 , 47 Prada, For Brazil, Its Finally Tomorrow. 48 The World Bank, Brazil: Trade-at-a-Glance Table, World Trade Indicators 200910, info. worldbank. orgetoolswtidocsBraziltaag. pdf (accessed August 8, 2012). 50 Brazil: State Role in the Economy, Economist Intelligence Unit, September 1, 2010, country. eiuarticle. aspxarticleid1307475115 (accessed August 8, 2012). 53 Samantha Pearson, Foreign Investment in Brazil Market Dives 70, The Financial Times . July 26, 2011. 54 Kenneth Rapoza, Brazil at Risk of Becoming One Big Petrobras, Forbes . February 2, 2012. 55 James Lord, Brazils Equity Market Runs Risk of Overheating, The Financial Times . January 19, 2010. 56 World Economic Forum, The Global Competitiveness Report 20112012: Country Profile Highlights, www3.weforum. orgdocsWEFGCRCountryProfilHighlights2011-12.pdf (accessed August 8, 2012). 57 Brazil: Trade Patterns and Regulations, Economist Intelligence Unit, September 1, 2011. 60 Jim ONeill, The Growth Map: Economic Opportunity in the BRIC and Beyond (New York: Portfolio, 2011).The management consulting industry Growth of consulting services in India: Panel discussion R. Srinivasan . Corporate Strategy amp Policy, Indian Institute of Management Bangalore, Bangalore, Karnataka, India Available online 23 October 2014. Management consulting as a profession is a coveted aspiration for management professionals. This academic note seeks to define management consulting as an industry, draw its boundaries, highlight the unique contributions of management consultants and consulting firms, and elucidate the challenges faced by the management consulting industry, with a specific focus on the Indian context. The note is followed by a panel discussion in which experts from the consulting industry participated. Management consulting Indian consulting industry History and emergence of management consulting Challenges facing management consulting industry The management consulting industry: academic perspective Management consulting is one of business earliest instances of outsourcing. Firms and managers have been seeking external advice and support for issues as critical as strategy to seemingly procedural matters such as accounting and taxation. Though the use of consultants and consulting firms has been prevalent for long, there has been not much research conducted on the same. Management consulting as an industry and practice can be viewed through the lenses of institutional theories (institutional entrepreneurship), transaction cost economics (principal-agent problems, transaction costs of outsourcing advice and implementation), and organization theories that study professional service firms (PSF). Academic research on the consulting industry has focussed on studying the practice of consulting, the nature of assignments consulting organizations undertake, the value they generate for their clients, and the way consulting firms are organized and managed. Mukherji and Ramachandran (2007) labelled outsourcing as practice in search of a theorywe could extend the same label to the consulting industry as well. The management consulting industry has received little academic attention due to a variety of reasons. First, it is highly fragmented with a variety of consulting firms, ranging from the big three global strategy-consulting firms to a large number of individualindependent consultants. Second, the industry has not been regulated, unlike other professional service firms such as accounting and law, and little attention has been paid to even the establishment of professional bodies such as consultants associations. Third, apart from the differences in size and scale, there exists a wide variety in the positioning and differentiation of the various consulting firms. There are firms that focus on a variety of issues in the same market such as the strategy-consulting firms, as there are firms that focus on a specific domain, such as information technology (IT). Finally, the lack of extensive studies on the consulting industry can be attributed to the nature of services they offerservices that are hard to study, measure, and quantify. The primary objective of this note is to elaborate on management consulting as an industry, and elucidate the critical role of management consulting firms. This note contains three sections. The first section outlines the boundaries of the consulting industry and lays out the landscape of consulting as a discipline, including its evolution. The second section extends the evolution of the industry to highlight the legitimate role of management consulting firms and the specific value they add to their clients. The third and final section describes the emerging challenges for the global and Indian management consulting industry. Management consulting as an industry The evolution of the management consulting industry is best studied through the institutional entrepreneurship lens. David, Sine, and Haveman (2013) found that in the emergent period of management consulting (in the years following the second world war), consulting entrepreneurs (a) highlighted significant contradictions between the status quo and broad cultural logics (b) used expertise from outside their field to propose solutions to these problems (c) highlighted the larger social benefits of these solutions (d) established the distinctiveness of their organizational forms by defining social codes, and (e) established relationships with prominent actors outside the field to legitimate their problem-solving models. Such institutional actions have contributed to the evolution of an industry that is populated by firms that are increasingly similar, though distinctively positioned. Semadini (2006) analyzed the management consulting industry and uncovered the dyadic and multi-dimensional nature of the competitive positioning decision. Positioning very near competitors provides firms with advantages including increased legitimacy, decreased uncertainty, and increased potential for spillovers, while reducing their opportunity to differentiate themselves from their closest rivals, hence increasing direct competition. Using service marks data from the US consulting industry, he elaborates how firms position themselves near or far from larger or older firms. While it is important to position the productsservices near larger competitors to gain legitimacy, reduce uncertainty, and gain from spillover benefits, it was found that firms positioned themselves farther from older, directly competing firms to sustain competitive differentiation. Of late, diversified corporations have employed corporate staff with titles that include consultant as full-time exclusive resources. While such internal consultants provide firms with specialized expertise, they would be an integral part of the organization and not necessarily bring in the outside perspective that clients most often seek. Fincham, Mohe, and Seidl (2013) identify three key characteristics of management consulting: (1) consultants provide support in diagnosing andor dealing with management problems (2) such consultants are external to the problem that is being addressed, with no implementation responsibilities and (3) such support is provided on a temporary basis. Based on these characteristics, they define management consulting as including any activity that has as its apparent justification the provision of some kind of support in identifying or dealing with management problems, provided by individuals, groups, or organizations that are external to the particular management domain and which are contracted by the management on a temporary basis (Fincham et al. 2013. 6). Greiner and Metzger (1983) define management consulting services as an advisory service contracted for and provided to organizations by specially trained and qualified persons who assist, in an objective and independent manner, the client organization to identify management problems, analyze such problems, and help, when requested, in the implementation of solutions (p. 7). Turner (1982). in one of the earliest articles about the consulting industry, elucidates eight fundamental purposes of consulting assignments, arranged hierarchically as: (1) providing information to a client (2) solving a clients problems (3) making a diagnosis, which may necessitate redefinition of the problem (4) making recommendations based on the diagnosis (5) assisting with the implementation of recommended solutions (6) building a consensus and commitment around corrective action (7) facilitating client learningthat is, teaching clients how to resolve similar problems in the future, and (8) permanently improving organizational effectiveness. (Turner, 1982. 120121) Management consultants add value to organizations (including governments and public sector undertakings) by providing them with unique expertise not easily available within the organizations andor in cases where the organizations were slow to respond to the environment (Momani, 2013 ). This combination of lack of diagnostic expertise with lack of innovationspeed of response in clients provides a rich opportunity for consulting firms to add value to their clients through their problem-solving skills. Therefore, the landscape of the management consulting industry is characterized by consultants who are (a) external to the organization (b) hired on a temporary basis (c) valued for their specialized experience and expertise that is not easily available within the client organization and (d) compensated for their advice on improving the organizations performance and educating the client on handling similar problems in the future. Management consulting industry: legitimacy and value addition The reasoning for the continued success of the management consulting industry can be studied through transaction cost economics (Coase, 1937 ). The decision to engage consultants to address an issue can be viewed as the trade-off between internal deployment of resources (hierarchy) and hiring of consultants from the outside (market). The choice should be based on the economic value added net the costs of transaction. For the consulting industry to survive legitimately, consulting firms and consultants need to provide significant value additions that outweigh the costs of engagement. When the industry was in its emergent years, the primary value addition by the consulting firms was the provision of smart people with diversity of experience and exposure, who could lend an impartial outside perspective on the clients problems and challenges. Sarvary (1999) argues that the consulting firms value proposition has transformed from providing smart people to solve clients problems to providing clients access to the consulting firms knowledge base, since clients and consulting firms both have access to the same resource pools for hiring (MBAs from top business schools). The shift in value proposition means consulting firms have to emphasize the power of its collective knowledge (acquired through experience of handling multiple problems, synthesis of these experiences to create new knowledge, and the ability of the firm to codify and distribute this knowledge to make it easily available to its consultants and clients). Maister (1993) classifies consulting firms into three groups, based on the work they perform: (1) procedural (work for which the solutionapproach is well known, but the success is in the efficiency of implementation) (2) brain (work that requires a lot of creativity and innovation drawn from professional expertise) and, (3) grey hair (work that is based on accumulated experience). Each of these types of consulting firms requires different kinds of resources and organization. While efficiency-based organizations thrive on large bases of codified knowledge, innovation-based and experience-based consulting firms thrive on building a team that is either professionally qualified and respected, or has significant domain knowledge and deep expertise. Consulting firms are therefore those organizations, whose expert knowledge workers (the operating core) exercise to a greater or lesser extent control over both the means and ends of service delivery (Kipping amp Kirkpatrick, 2013. 778). It might be worthwhile at this point to consider management-consulting firms as professional service firms (or PSF). von Nordenflycht (2010) defines professional service firms as possessing three distinct characteristicsknowledge intensity, low capital intensity, and a professional workforce. Knowledge intensity refers to a complex body of knowledge embedded in individuals (and not in the organizations equipment, products, or routines), that forms the basis of the organizations value addition. Low capital intensity indicates that the firms output does not depend on material assets like inventory, manufacturing and distribution facilities, or even significant intellectual capital, implying high mobility of the workforce. Professionalized workforce refers to the employees identification with a specific professionone that is characterized by a specific knowledge base, significant regulation and control, an ideology (an explicit code of ethics or not so explicit norms of behaviour) that governs its members, and non-price competition (Thakor and Kumar, 2000 and von Nordenflycht, 2010 ). Kipping and Kirkpatrick (2013) argue that among PSFs, firms competing in relatively unregulated and open (or easy to enter) industries like management consulting are organized differently from those in industries like accounting and law. Given the low levels of professional regulation (most of it still voluntary) and highly differentiated value propositions and competitive positioning, management-consulting firms adopt more corporate and managerial modes of operation rather than the traditional professional mode of operation that characterizes most PSFs. However, Malhotra and Morris (2009) argue that the differences in the organization of PSFs depend on the type of knowledge they leverage (normative, syncretic, or technical), strength of social closure, jurisdictional boundaries (such as national differences), and the type of client interaction (frequency and degree of influence). Going by their arguments, management consulting firms leverage normative knowledge, have weak social closures (there is no industry-wide accepted certification for management consulting as a profession), can extend their services across geographic boundaries easily, and have significant client interactions (in several instances, even the consulting advice is co-created with the client). Therefore, management-consulting firms are more likely to be professionally organized, with hierarchical team structures diversify into a variety of services around the core internationalize and create global networks, have widely dispersed offices and charge clients with variable fees based on the consultants time commitments (Malhotra amp Morris, 2009 ). von Nordenflycht (2010) characterized management-consulting firms as neo-PSFs, distinct from classic PSFs (such as law and accounting) due to their absence of a strong professional ideology and weak regulation and control. Such firms are more likely to emphasize internal training and acculturation of their employees to achieve internal standardization of skills, rather than conform to the community modes of organizing specifieddefined by the industry associationsregulatory bodies (Kipping amp Kirkpatrick, 2013 ). Furusten (2013) argued that the source of professionalism in the management consulting industry may vary. The mechanism for authorization of professionalism and expertise is through trust gained by the consultant and the consulting firm through versatility, availability, relevance, and differentiation in their field. Mosely (1970). recognizing the increased opportunity for consultants to demonstrate unethical behaviour and hide their incompetence, recommended that a professional association of consulting firms and consultants be formed that would define the norms of behaviour and investigate transgressions. It is also imperative that consultants form and adhere strictly to the codes of ethics and integrity, so that the responsibilities of the management consulting outcomes are equally shared by the client and the consultants (Hagenmeyer, 2007 ). In such dilemmas, reputation capital acts as a hedge against unethical, non-professional, or opportunistic behaviour by either contracting party (Mukherji amp Ramachandran, 2007 ). Amonini, McColl-Kennedy, Soutar, and Sweeney (2010) study a variety of PSFs and demonstrate that PSFs seek to differentiate themselves by developing long term relationships with their clients, emphasizing on providing better service quality and greater value, and investing in developing strong brandsreputations. Competitive positioning is critical to the success of management consulting firms, as eliteness motivation or elitism significantly motivates graduates to choose consulting as a career (Gore, 1972. Miner, 1971 and Miner, 1972 ). Given the substantial salary and benefit differences between partners and analysts in strategy-consulting firms, a significant proportion of MBA graduates prefer to make their careers as consultants. However, a study of differences between consultants and managers does not lend support to the hypothesis that consultants are more intelligent than those who chose a managerial career (Miner, 1973 ), which also makes for the argument that ex-consultants do not necessarily make great managers Haverila, Bateman, and Naumann (2011) using a content analysis study of customer satisfaction of management consultants found that apart from traditional sources of satisfaction such as consultant knowledge and expertise, customer focus, and value, clients valued complex project management capabilities when they engaged consultants for large projects, and multinational exposure and expertise of the firm. Based on the specializations of the consulting firms, we evolve a typology of management consulting firms (see Table 1 ). The first set of consulting firms focus on providing strategy and organizational restructuring advice to their clients. These firms leverage their organizational tacit knowledge to differentiate their services, and are typically engaged with the client for short periods of time, with little or no implementation responsibilities. The extent of client capture (the degree to which clients can control or influence the process of professional service delivery) is very high for strategy consultants as the resource expertise is similar between the client and the consulting firm, and the firm is dependent on maintaining good relationships with the client for obtaining further work (Malhotra amp Morris, 2009 ). Table 1. A typology of management consulting firms. The second type of consulting firms includes those that provide technologyoperations and cost control consulting. These firms leverage their technical knowledge bases gained through their breadth of experience across contexts, and are typically engaged with the client for a longer term to support the implementation, including training and hand-holding of the clients personnel. Client capture varies between high (for technology consulting assignments) and moderate (for process reengineering assignments). The third type of consulting firms comprises niche firms that provide specific solutions to their clients. Typically, they could be specialists in specific industrysectors or in functional domains such as innovation. These firms differentiate on the basis of their deep domain expertise and are typically involved with clients on a long-term basis. Most of these consulting firms secure contracts that retain them for specific periods of time, rather than for specific projects or assignments. Given their intense involvement with their clients, they typically also own the implementation of their advice, including handling change management issues. The expertise differential between these consultants and their clients is very high leading to low client capture. Emerging challenges for the management consulting industry The management consulting industry has been through severe challenges. For instance, in 2002, The Economist (2002) wrote that the strategy-consulting industry was wasting away as strategy had become a commodity, as bright business school graduates were equally available to top corporations as they were to consulting firms for hiring. Fortune Magazine (2003) concluded that pure-play strategy-consulting as a business was shrinking, as clients reduced their engagement levels, shortened project lifecycles, and began demanding concrete, measurable returns for their investments. The management consulting industry is known to operate under a lot of secrecy, to the extent that some consultants use code-names for their clients, lest someone discover who is offering what services to them even during informal conversations. The big-three strategy-consulting firms dominate the global consulting industry: McKinsey amp Company (McKinsey), Boston Consulting Group (BCG), and the Bain amp Company (Bain). As The Economist (2013) reported, these three firms grew by 12.4, 14.5, and 17.3, with revenues of US5.3b, US3.1b, and US2.1b, earned from 17,000 employees in 50 countries, 6200 employees in 43 countries, and 5500 employees in 31 countries, respectively, in the year 2011, which was marked by severe economic downturn. In spite of the increasing convergence of the processes and practices in the industry, stereotypes persist. As The Economist (2013) elucidates, McKinsey consultants are perceived to be vainies, as they lecture clients on the McKinsey way BCG consultants are labelled as brainies as they spout academic theory to sell their services and Bain consultants have a reputation for taking responsibility for improving the clients bottom-line results. With the maturing of the industry, it is no longer possible even for the big-three strategy-consulting firms to only provide strategy advice and not take responsibility for implementation. In fact, as the big-three firms are expanding their service offerings to include a larger bouquet of services, other firms like the big-four accounting firms (PwC, Deloitte, KPMG and EampY) are also expanding their services to step into strategy consulting. Van den Bosch, Baaij, and Volberda (2005) propose three strategic options for consulting firms: follow the herd, become ambidextrous , or back to the original focus, when faced with decreasing returns to exploitation of prior accumulated knowledge. These decreasing returns are caused by the entry of new players into the industry, as well as the clients becoming more capable of solving their own problems. Christensen, Wang, and van Bever (2013) identify three steps in disruptions that can affect the consulting industry, similar to the disruptions they help their clients overcome. First, new competitors arrive at the industry doorstep with newnon-traditional business models. For instance, the consulting industry has seen entry of the big-four accounting firms, forward integration by technology consultants (such as EDSs acquisition of AT Kearney, or IBMs services), and the entry of specialized niche consulting firms. The second step in the disruption is the incumbents responsesthe responses include ignoring the new entrants or conceding the mass market to new entrants and segment-retreat into high-margin low-volume activities. The third step in the disruption process is the maturing of the disruptive entrants business models from a barely good enough quality to a generally acceptable level, thereby flipping the market into new bases of competition. Christensen et al. (2013) suggest that consulting firms engage in any of the following six self-disruptive behaviours, in order to balance their core business model along with the disruptive models: (1) create an autonomous business unit (2) hire leaders who come from the relevant schools of experience (3) set up an independent (and custom-made) resource allocation process (4) evolve independent sales channels (5) establish new profit models, and (6) ensure unwavering commitment from the leadership. Globalization presents another significant challenge for the management consulting industry. When small firms who differentiated themselves based on localcontextual knowledge dominated the industry, consulting firms could organize themselves as neo-PSFs (von Nordenflycht, 2010 ). However, with the globalization of clients, global management consulting firms have begun organizing themselves as global professional networks (GPN) (Brock, 2006 ). Using the institutional theory and the resource-based view of the firm, Brock (2012) identified five managerial and organizational challenges for globalizing PSFs. First, while global market entry provides the opportunity to maintain growth through acquisitions (a means of quick capability building and customer-acquisition and retention), the challenge for globalizing PSFs is to accomplish this without compromising on the reputational capital as their source of differentiation. The second challenge for globalizing PSFs is the varied governance forms across borders, especially as firms operate in a combination of emerging and mature economies, with different institutional norms and legal frameworks. Third, traditional organizational structures that involved partners (who were owners of the firm and were considered expertsspecialists) and associates (who did the analytical work and were either on a path to partnership or exit from the firm in a few years) are giving way to new organizational structures, based on specialized business functions, such as business development. A key organizational attribute of these changing structures is the concept of leverage, which denotes the efficiency of the firms associates to leverage the knowledge of the partners. In other words, the number of associates per partner denotes the leverage ratio. The fourth challenge is presented by the high leverage ratios in specialized firms, which restricts new knowledge creation, and career opportunities for associates. The fifth and final challenge is to integrate the global spread of PSFs into learning from multiple contexts, efficient knowledge transfer within the organization, and effective leverage of this collective knowledge into revenues and profits for the firm, which is referred to as organizational wisdom (Scott-Kennel amp von Batenburg, 2012 ). Efficient management of the firms internal tacit knowledge is therefore the key to effective management and growth of a consulting firm (Scott-Kennel amp von Batenburg, 2012 ). Given that knowledge assets are multi-dimensional in nature, it is important that consulting firms invest in various human resources (HR) configurations to manage human, social, and organizational capital (Swart amp Kinnie, 2013 ). Such firms face significant conflicts in managing the balance between routines that support external demands from clients (innovation) and internal utilization of capabilities (efficient deployment of specialized human assets) (Jensen, Poulfelt, amp Kraus, 2010 ). In sum, the challenges facing the management consulting industry fall into three broad categories Competition and differentiation: As competition intensifies with the entry of heterogeneous players in the market, there is a significant need for consulting firms to define their unique identities and differentiate themselves from the rest, in an increasingly fragmented industry. Organizational design of the management consulting firm: The traditional professional partnership organizational form is under threat with increasing globalization of consulting firms as well as their clients. This necessitates that consulting firms consciously adopt new organizational forms that best suit their contexts and identities. Internal organization of knowledge flows to serve client needs: High knowledge intensity of management consulting firms ensures that firms proactively manage their knowledge flows within the firm, especially tacit organizational knowledge. Efficient leverage of organizational knowledge is essential for creating and maintaining the balance between exploitation of existing knowledge and creating new knowledge. Indian management consulting industry The Indian management consulting industry is diverse, consisting of a wide variety of organizations, including global strategy firms, consulting arms of technology firms (such as IBM and Accenture) and the big-four accounting firms (such as PwC and KPMG), and a host of niche consulting firms (including Universal Consulting, Avalon Consulting, and Oliver Wyman). Malhotra (2013) estimated that around 500600 high-value consulting assignments are awarded every year by Indian clients, catering to an US250300 million market, including about 3040 projects worth over US2 million each. Indian clients, despite being value conscious, were willing to engage a variety of consulting firms to address specific concerns. It is not unlikely that multiple consulting firms could be working at the same time with a single client, engaged in different facets of the business. For instance, Deloitte Consulting considers India as a long-term play, where the key to success is to provide value innovation, leveraging their investments in big data and analytics (Das, 2013 ). Over the past few years, the Indian management consulting industry has witnessed three major trends: increasing importance of high-end strategy consulting, evolution of greater market segmentation, and focus on the outcomes of the consulting assignment (Meritus Knowledge Center, 2012 ). Historically, the Indian consulting industry was dominated by a demand for basic services such as market research, supply chain optimization, information technology implementation, and financial restructuring (including equity and debt funding). However, as the Indian economy opened up to foreign competition and with Indian corporations venturing into international markets, with deregulation, and the rise of the value-conscious middle - and lower-income customers (also known as the bottom-of-pyramid or BOP markets), firms have begun to realize the opportunity cost to the firm because of poor strategy. Therefore, the demand for high-end strategy consulting has begun attracting global strategy consulting firms to India. Some of the early clients of these multinational corporation (MNC) strategy-consulting firms in India were traditional business houses, who used their services to restructure their diverse businesses and seek foreign resourcesmarket access. The demand for strategy consulting has grown in smaller professional firms, as they compete with national and global competitors with their innovative productsservices (Malhotra, 2013 ). The second trend in the Indian management consulting industry is the increasing segmentation of the industry. The MNC strategy-consulting firms offer their services in the domains of strategy and corporate restructuring, based on extensive global experience of similar projects. Most MNC consulting firms are active in India either through dedicated offices or through designated representatives. These MNC consulting firms claim to bring global best practices, leveraging their diverse client-base and equally diverse consultants and resources. On the other hand, niche management consulting firms focus on either a specific domain (say infrastructure) or a class of problems (say innovation). Such niche firms leverage their depth of expertise and typically work very closely with their clients, often for extended periods of time. The industry is also home to a wide variety of operational consulting firms, with focus on improving their clients operational efficiencies (like optimization of supply chains, change management, or manufacturing efficiencies). A special sub-segment of these operational consulting firms includes those that focus on IT consulting (including technology and services) as a means of either operational efficiency improvements or greater innovation. Indian clients are culturally distinct from the Western markets, in their explicit preference for outcomes of the consulting projects, rather than the value attached to the methodology or problem solving methods. Indian clients significantly value either experience gained through breadth of exposure to a wide variety of clients, or deep expertise gained through working on a number of similar problemsclients. Both of these expectations veer towards valuing consultants with long years of experience. As consulting firms employ younger people with management degrees who bring in fresh perspectives to management problems, it becomes imperative for consulting firms to provide customers with teams that ensure a healthy mix of consultants who bring in to the team breadth of experience, depth of exposure, and innovative ideas. Issues for discussion in the round table Based on the analysis of the management consulting industry and the challenges they face, we have brought together a panel of consulting industry participants representing the spectrum of consulting firmspure play management consultants, technology consultants, consulting arms of accounting and audit firms, and niche consultants from the Indian context. The primary objectives of the round table include (1) understanding the landscape of consulting firms in India and their differentiationpositioning (2) exploring how consulting firms grow by maintaining strong relationships with their clients and (3) elucidating the processes for managing human and knowledge assets. Growth of consulting services in India: Panel discussionBrazil: Restoring Economic Growth Through Economic Freedom Brazil: Restoring Economic Growth Through Economic Freedom Select a Section 1 0 Toggle open close Abstract: Brazil is the worlds fifth-largest country, Latin Americas largest economy, and an important trading partner for the U. S. The Brazilian government dominates many areas of the countrys economy, undercutting development of a more vibrant private sector, and Brazils four-year growth average of 4 percent has recently weakened. Government expenditures consume more than 40 percent of GDP. The pace of Brazils regulatory reform has slowed, and the tax burden is much heavier than in many other emerging economies. Corruption is high, private property rights are insecure, and the judicial system remains vulnerable to political influence. Brazil needs more economic freedom, and the government should eliminate barriers to entrepreneurial activityburdensome taxes, inefficient regulation, flaws in long-term financing, and continuing government-created rigidities in the labor market. The worlds fifth-largest country and Latin Americas largest economy, Brazil is an important American trading partner. The Brazilian economy averaged better than 4 percent annual growth from 2006 to 2010 largely thanks to surging prices for exported commodities. Yet that growth rate was substantially less than many other major emerging countries,1 and growth has weakened considerably since 2011. Brazilians are justifiably concerned that their country has become stuck again in the decades-old cycle of high inflation and commodity dependence from which it emerged only in the 1990s. Strengthening the foundations of economic freedom is the critical step required to restore rapid growth. The Brazilian government continues to dominate many areas of the countrys economy, undercutting development of a more vibrant private sector. The efficiency and overall quality of government services are inadequate, and the government seems to be more skilled at collecting taxes than at implementing needed reforms. Total government expenditures, including public-sector wages and transfer payments, consume more than 40 percent of gross domestic product (GDP). The overall pace of Brazils regulatory reform has slowed, and the tax burden is much heavier than in the emerging economies of Colombia, Peru, and Mexico. Corruption is problematic, private property rights are insecure, and the judicial system remains vulnerable to political influence. Brazil is also too dependent on commodity exports and risks being afflicted by the Dutch disease,2 where revenues from natural resources make the currency stronger, imports cheaper, and manufactured products more expensive. Sustainable growth will require internal reforms to boost productivity and economic freedom. The commodity-induced era of Brazilian prosperity has been driven primarily by China. If China continues to rise for another decade or more, Brazil may become locked in a dependent relationship, which it will have to break later. Alternately, Beijing also faces mounting challenges due to its own backsliding on economic freedom. If China stumbles before Brazil gets its house in order, the result will be more painful. In either case, Brazils best response to China is to become more competitive and more innovativeto embrace greater economic freedom. While U. S.-led advances in horizontal drilling and fracking technologies drive down oil prices and make production of Brazils plentiful but difficult-to-extract pre-salt offshore oil ever more problematic, Brazils governmentliving in the pastis demanding royalties that are too high for pre-salt production to be profitable. Meanwhile, a recent report indicates that 40 percent of the projectsin infrastructure, housing, transportation, and securitycurrently being carried out by the Brazilian government to prepare for the millions of tourists that will visit the country for the 2014 World Cup and 2016 Rio Olympics are not complete.3 President Dilma Rousseff has won praise recently in Brazil for taking a hard line against corruption.4 But her initial response to Brazils current economic challenges has been to resort to the sort of Keynesian stimulus government spending programs5 that not only have been triedand have failedin the United States and elsewhere, but will also create a plethora of new opportunities for cronyist corruption. Instead, her government should make the painful structural reforms to create conditions for growth, especially in non-commodity sectors. These reforms should be led by further privatization, especially in infrastructure, and by reducing burdensome taxes, inefficient regulation, barriers to entrepreneurial activity, barriers to long-term financing, and rigidities in the labor market. The Basis for Past Success As Professor Walter Russell Meade has noted, the past still haunts Brazil. In spite of its tremendous wealth of natural resources and human capital the country suffered countless booms and busts through the 19th and 20th centuries and was the poster child of hyperinflation in the 1980s and 1990s.6 As a result, for many decades pundits have said that Brazil is the country of the future, and always will be. This historic political and economic instability changed, first with the return to democracy through the 1988 constitution, and then with the groundbreaking neo-liberal policy reforms of the Washington Consensusdaringly begun in the early 1990s by Finance Minister (and later two-term president) Fernando Henrique Cardoso. This new relative stability was then surprisingly reinforced and strengthened by populist-leftist President Luiz Incio Lula da Silvaand so the Washington Consensus reforms finally broke the back of Brazils chronic hyperinflation and set the stage for record growth. The groundwork for reform was laid in 1985. When President Jose Sarney unexpectedly assumed office upon the death of Tancredo Neves, he established a strong executive presidential system with emergency powers to enact temporary laws ( medidas provisorias or MPs) that became crucial to governmental operation. Thus, although neither Sarneys heterodox Plano Cruzado (involving the creation of a new currency, the cruzado, aimed at cutting inflation) nor his successor Fernando Collors more orthodox Plano Cruzeiro (plans for a second new currency, that also failed to bring inflation under control) were successful in defeating hyperinflation, which peaked at nearly 3,000 percent in 1990,7 crippling Brazil economically, the MP tool was in place. This tool assisted Cardoso in launching the successful Plano Real (the third, and finally successful, introduction of the real currency) in 1994 that fundamentally restructured Brazils economy. Cardoso issued more than 300 MPs (and re-issued 4,500 more)8 to spur privatization and open Brazil to global trade and investment. A vigilant, restrictive, and independent monetary policy overseen by neo-liberal former international bankers and anchored to the U. S. dollar by high real interest rates permitted the economic rules in Brazil to become more permanent and predictable. Foreign direct investments flowed in. According to Professor Albert Fishlow of Columbia University, the agriculture, mining, and petroleum sectors increased exports while many state-owned industries and much state-owned infrastructure were sold to private entrepreneurs who could manage them more efficiently. The result was a revived industrial sector, increased access to private credit, more efficient bankruptcy processing, and a more effective regulatory regime. Meanwhile Brazils economy and its politics became more stable.9 Brazils success would not have been sustained without Lulas commitment upon assuming office in 2003 to continue Cardosos policies, which he deemed at the time a political as well as an economic necessity, and to abide by the terms of a Cardoso-era 30 billion bailout10 from the International Monetary Fund (IMF). Lula reaped direct political benefits by sticking with these pro-growth policies. Brazils subsequent prosperity enabled Lula to increase social spending on education, health care, and other programs for more than 11 million households living in poverty. For example, funding for Lulas Conditional Cash Transfer (CCT)11 Bolsa Familia (Family Stipend) program was made possible only through tax proceeds generated by private-sector-led economic growth.12 Helped by booming global commodity prices, Lulas early adherence to Cardosos neo-liberal reforms boosted the emerging Brazilian middle class while also lifting up the poorer classes. But in the latter years of his presidency, Lula also instituted increasingly assertive and statist neo-developmentalist13 industrial policies through the National Bank for Economic and Social Development (BNDES).14 Blaming global economic conditions, Lula gradually abandoned earlier efforts at decentralization and federalism inherent in the 1988 constitution in favor of recentralization. The tendency to backslide toward statism in Lulas second term set the stage for potentially repeating past mistakes by recreating an inefficient and bloated central government that intervenes too much in the marketplace. The question now is whether President Rousseff will make federalism and private-sector-led growth a priority again. Fishlow has observed that the new leadership needed in Brazil should not come from the federal government, but from the state and municipal levels as power is concentrated in the hands of mayors of important cities and state governors.15 Brazil v. China: Dont Follow the Red BRIC Road Over the past five years, the Peoples Republic of China (PRC) has become Brazils largest trading partner, as well as a significant investment partner. Brazils fortunes have become intertwined with Chinas, and the two are understandably compared. The PRC is undeniably the leader in the pace of economic growth, and some see China as a viable economic model for Brazil. Such a view is severely misguided, however, and Chinese-style development would have ugly consequences for Brazil. Nineteen hundred ninety-one was the last full year of the political and economic repression in the PRC that followed the crackdown after the demonstrations in Tiananmen Square in 1989. At that time, Brazil was eight times wealthier than China and larger in aggregate terms. In 1992, the General Secretary of the Communist Party, Deng Xiaoping, restarted Chinese economic reform. Twenty years later, China is three and a half times larger than Brazil in aggregate terms, and Brazil is less than twice as wealthy. The story of the PRCs recent positive growth performance is well known, but has been misinterpreted. Chinas success stems not from the past eight to nine years of government intervention, which has led only to macroeconomic imbalances and unsustainably high liquidity16 similar to problems seen in the American economy over the last decade. The PRCs success stems from the market reform years of 1978 to 1989 and 1992 to 2002, culminating with entry into the World Trade Organization (WTO). As of 2002, the PRC had no macroeconomic imbalance and no excess liquidity, and its economy has structurally weakened since 2006. As it continues to do so, the misunderstanding of the role of an expanding state in market activity is finally giving way to skepticism about Chinas long-term prospects absent reform. Brazilian policymakers should not be fooled by claims of statist superiority.17 Chinas rapid growth does, however, have important implications for the bilateral relationship. The PRCs expansion and ensuing demand for commodities that it lacks, such as iron ore, soybeans, crude oil, and natural gas, has pulled Brazil along.18 But while the Brazilian agricultural competitiveness, metal deposits, and expanding energy role have been a boon to China, they certainly do not drive Chinese growth. Rather, Chinas expansion has driven Brazilian growth. If China stumbles, the challenge for Brazil will be to find sources of growth that do not rely on transient external demand. Brazils resource endowment is a boon, but one that waxes and wanes with global cycles. Improving the productivity of domestic labor and capital through reform is a permanent boost, not a transient one. As China fades in this scenario, more economic freedom could make Brazil the new China, only richer. On the other hand, if China revives its economy, it will be due to renewed reform aimed at achieving greater economic freedom, as Deng accepted in 1978 and re-initiated in 1992. Renewed Chinese reform and efficiency would cut demand for some Brazilian goods, such as iron ore, but gas and farm goods would remain strong on the basis of Chinese consumer demand for higher-quality food and environmental improvements.19 The question is whether that is enough. Should Brazil be content following in Chinas wake even if the PRC can rise for another decade or more No, Brazil can do better. There is no necessary choice to make between a huge trade and investment relationship with a vibrant China and greater economic freedom. Market-based reform will make Brazil more competitive and more innovative, better able to take advantage of Chinas strengths, and better able to compete with China. The belief that Brazil must curb economic freedom to compete with the PRC is mistaken. State support for industries in an attempt to ensure their competitiveness against Chinese or other firms comes at a cost to the rest of society. The PRC has paid that price in ecological degradation, rising income inequality, and economic imbalances that must ultimately be corrected.20 Brazil can mimic Chinese top-down planning for a time, but it will pay a high price. Meanwhile, market-based reform to improve the productivity of Brazilian workers and expand the range of action for Brazilian companies enhances competitiveness and costs nothing. Greater efficiency minimizes the threat to the environment by minimizing resource depletion. An open Brazil integrated with the world economy is in a better position to take full advantage of global demand for its resources rather than facing retaliation for its own protectionism and exclusion from preferential trade agreements. A more open Brazil will reward Brazils farmers, miners, and energy workers, alleviating income inequality. Brazil should respond to a successful China the same way it would to an unsuccessful China: with more economic freedom. The 2012 Index of Economic Freedom ,21 published by The Heritage Foundation and The Wall Street Journal . provides some important perspectives on Brazils most-needed reforms. Brazils overall economic freedom score is 57.9 out of 100, making its economy the 99th freest of 179 countries in the 2012 Index . Its score is only 1.6 points better than in 2011, with improvements in just four of the 10 economic freedoms. Brazil is ranked 20th of 29 countries in the South and Central America and the Caribbean regime, and its overall score is below the regional and world averages of 60 and 59.5, respectively. In each area of economic freedom there is room for significant improvement. Protection of Property Rights. All contracts in Brazil are generally considered secure, but Brazils judiciary is inefficient and subject to political and economic influence. It is also under-resourced compared to other government ministries and its staff lacks adequate training. Court decisions can take years to be handed down, and judgments by the top-level Supreme Federal Tribunal are not automatically binding on lower courts. In 2011, the U. S. Department of State reported that the courts were overrun with property rights cases and that the backlog was growing larger.22 In a 2009 Assessment of Brazil conducted by the anti-corruption group Global Integrity, small companies reported that they often cannot afford the costs of a lawsuit.23 The World Banks International Finance Corporation revealed in its 2009 Enterprise Survey that almost half of small and medium-sized companies in Brazil consider the functioning of the courts a major constraint for doing business in the country.24 Courts at the lower levels are particularly prone to corruption, political influence, and intimidation.25 It is vital to Brazils healthy economic growth that people, both native and foreign, be able to buy and sell real property easily, with low transaction costs. Brazils mortgage market is still underdeveloped and foreigners in particular may encounter difficulty in obtaining mortgage financing. Protection of intellectual property rights has improved, but piracy of copyrighted materials persists. Freedom from Corruption. Corruption is often an obstacle to investment in Brazil. Businesses bidding on government procurement contracts can encounter corruption, which is also a problem in the lower courts. In 2010, corruption investigations of politicians from opposition and government-coalition parties resulted in prison sentences for two governors. Since then, even higher-profile scandals have come to light. Between June and September 2011 President Dilma Rousseff lost five cabinet-level officials, none who face criminal charges, but four of whom left after allegations of corruption were levied against them.26 Corruption also hinders the daily operations of companies, both Brazilian and foreign-owned. A 2008 business survey commissioned by Norways Ministry of Foreign Affairs, Collaboration on Anti-Corruption: Norway and Brazil, found a general lack of trust in the judicial system that makes companies reluctant to file complaints to the courts in situations where they have been victims of corruption. According to the survey, filing complaints to courts is considered a waste of time and money by most respondents. Hence, many companies remain silent about corrupt acts committed against them, even if such crimes have cost them important contracts.27 Fiscal Freedom. Although Brazils economy shows great promise to move from the 10th-largest economy in the world to the fourth-largest by 2050, it must still overcome enormous challenges and reduce burdensome regulations and rates of taxation in order to fully realize its potential. The Rousseff government should seek to become more competitive by improving Brazils score on fiscal freedom. Achieving that goal will not be easy. As Sao Paolo attorney Raphael de Neto told The Economist . the Brazilian governments ability to collect taxes has run far ahead of any effort to streamline them, increasing the burden on businesses.28 The top personal income tax rate is 27.5 percent. The standard corporate tax rate is 15 percent, which when combined with a 10 percent surtax and 9 percent social contribution on net profit paid by most industries brings the effective rate to 34 percent. Other taxes include a financial transactions tax, with the overall tax burden equal to 34.3 percent of total domestic income. Public spending is over one-third of GDP, resulting in chronic budget deficits. Government debt is 66.18 percent of GDP.29 Tax environments that are welcoming to business can help lead to an increase in foreign direct investment (FDI). This is of particular interest to Brazil since FDI inflows to Brazil fell by 42 percent year-on-year, to USD25.9bn in 2009, down from record-high inflows of US45.05bn in 2008.30 Among other reasons, Brazil will require massive amounts of FDI and access to advanced technology in order to extract the 80 billion to 100 billion barrels of light sweet crude oil that are thought to lie offshore under five miles of ocean water and an additional mile or two of pre-salt rock below the South Atlantic. As it stands today in Brazil, tax filings are not only financially costly, but the time required to complete tax filings also has an additional negative impact. For business managers, time is money. The complex tax structure consumes roughly 2,600 hours a year for local medium-size companies, according to the International Finance Corporations and World Banks annual Doing Business survey. This is primarily due to taxes, such as Brazils corporate income tax (IRPJ), social security contributions (INSS), and taxes on goods and services (ICMS) that are similar to value-added taxes.31 In comparison, Doing Business reports that China has taken steps to improve the tax environment with its new corporate income tax law that unified the tax regimes for domestic and foreign enterprises and clarified the calculation of taxable income for corporate income tax purposes.32 Brazils disadvantage in the worldwide competition for FDI has been noted by corporate executives. These corporate leaders understand that the current tax structure in Brazil is too complicated. Commenting on Brazils taxation regulatory regime Mark Buthman, chief financial officer for KimberlyClark, has said that if its not the most complicated tax system in the world, its certainly right up there.33 Tarek Farahat, CEO of Procter amp Gamble Brazil, has expressed similar concerns, stating that Brazil needs tax simplification. This will bring transparency and competitiveness and lay the groundwork for sustainable growth.34 Government Spending. In the most recent year, total government expenditures, including consumption and transfer payments, amount to 41 percent of GDP public debt is just below 40 percent of GDP. Besides debt service, government spending is focused mainly on pensions, transfers to local governments, and funding the bureaucracy. Public-sector wages and transfer payments account for more than 70 percent of the countrys primary spending. Both private-sector and public-sector pensions in Brazil are among the most generous in the world, replacing on average 75 percent of pre-retirement income. Some of these pensions are paid to the very poor and are intended to reduce poverty. In general, however, rural workers aged over 60, and anyone poor and over 65, can get a pension of 622 realsthe minimum wagewithout ever having paid into the system.35 Although this provision is relatively low in budgetary cost to the government2 percent of GDP annually the bigger problems it creates, ones which Brazil shares with de facto bankrupt welfare states, such as Greece, stem from rules that allow contributing workers to retire earlier, with larger pensions, than almost anywhere else in the world.36 Given that set of anti-competitive and ultimately fiscally unsustainable incentives, perhaps it is not surprising that most Brazilians retire startlingly early: The average male in the private sector is 54 the average woman, 52. Survivors benefits have no age limits. To make Brazils unfunded entitlement liabilities even more daunting, there is also a provision that permits families to inherit 100 percent of the pension of a deceased breadwinner, meaning that even young, childless widows never need work. Today in Brazil fully one-tenth of all 45-year-olds are already receiving pensions.37 Business Freedom. To become more globally competitive, Brazil should eliminate barriers to entrepreneurial activity by, for example, reducing the number of procedures, the number of days, and the cost associated with obtaining a business license. Although the Brazilian government took some steps in 2011 to ease business start-up costs by enhancing the degree of electronic synchronization between federal and state tax authorities, according to Doing Business,38 it is nowhere near the top 10 reformers in business freedom globally. In 2011, the government of neighboring Peru made it significantly easier to start a business, obtain construction permits, register property, and trade across borders. Peru eased the process of starting a business by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration.39 In Brazil it takes 13 procedures, 119 days, and roughly the cost of 5.4 percent of income per capita40 to start a business. In New Zealand, it takes only one procedure and one day to start a company.41 Even China scores slightly betterstarting a business there takes 14 procedures, 38 days, and costs 3.5 percent of income.42 Labor Freedom. Brazils rigid labor market is an added layer of regulatory burdens on the countrys private sector that negatively impacts its ability to compete for a stellar ranking in economic freedom. Stifling labor regulations continue to undermine employment and productivity growth. Brazils labor freedom score falls in the bottom half of the world rankings. The non-salary cost of employing a worker is high, and dismissing a redundant employee can be costly because of government-imposed regulations governing severance and dismissal. Mandated benefits amplify overall labor costs. As a result, the informal sector remains sizeable. As The Wall Street Journal s Sao Paolo correspondent Paulo Prada has reported, Brazils restrictive business environment and rigid labor code date back to the 1940s and were originally modeled on the statist policies of Mussolini.43 The result, tragically for people in Brazil who would aspire to middle-class living standards, is that the high costs generated by these retrograde policies hinder companies from hiring new workers, thus trapping many would-be small business owners, laborers, and self-employed artisans in the shadows of the informal economy. As The Economist reported: That many of the new jobs are formal (i. e. legally registered) is despite, rather than because of, the labor laws. The trend to formalization is largely a result of the greater availability of bank credit and equity capital on the one hand, and recent changes that make it easier to register micro-businesses on the other. And it coexists with two longstanding Brazilian weaknesses: high job turnover and low productivity growth.44 Monetary Freedom. The average rate of inflation was 5.2 percent in August 2012.45 Prudent fiscal and monetary policies helped Brazil avoid the worst of the global financial crisis of 2008 and 2009, although its booming economy (led by strong commodity exports) ultimately may force authorities to resort to monetary tightening to reduce future inflationary pressures. Although such public services as railways, telecommunications, and electricity have been privatized, regulatory agencies oversee prices. The National Petroleum Agency fixes the wholesale price of fuel and the government controls airfares. The fiscal system for petroleum production includes, in addition to royalties, a special participation tax (PE). This tax protects the government from underpayment by companies who discover large volumes of hydrocarbon. It has a progressive rate, ranging from 10 percent to 40 percent, depending on the volume produced, the water depth, the location of the field, the net production revenue, and the time of production.46 Trade Freedom. Paulo Prada neatly summarizes Brazils trade freedom challenges thus: To casual observers, things will look better as Brazil gears up for hosting soccers World Cup in 2014 and the Summer Olympics in Rio de Janeiro in 2016. New roads and airport terminals will be christened along with modernized stadiums and scenic, well-policed promenades. But manufacturers, exporters and shipperswho regularly wait days or weeks for backlogs in ports and customs facilities to clearknow Brazil needs more than just cosmetic changes.47 According to the World Bank, Brazils average trade-weighted tariff rate in 2009 and 2010 was 8.7 percent.48 Increasing reliance on non-tariff barriers and the use of anti-dumping measures is a cause for concern. In September 2011, Brazil slapped an anti-dumping tax on steel products from China, one of its closest trade partners.49 Foreign investors are granted national treatment (the same treatment that domestic investors receive), but their activity is restricted in some sectors, including communications and mining. The banking sector emerged relatively unscathed from the global downturn, with credits to the private sector increasing. Import bans and restrictions, market access barriers in services, border taxes and fees, restrictive regulatory and licensing rules, subsidies, complex customs procedures, and problematic protection of intellectual property rights add to the cost of trade. Investment Freedom. Despite some progress, new investment and production remains cumbersome and bureaucratic. Foreign investors are granted national treatment, but foreign investment is restricted in the communications, transportation, and mining industries. In general, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll in firms employing three or more persons. The tax and regulatory environment is burdensome, and legal disputes can be time-consuming. There are few restrictions on foreign exchange transactions. Foreign investors, upon registering their investments with the central bank, may remit dividends, capital (including capital gains), and royalties. The central bank regulates outward direct investment in some cases, including transfers and remittances. Foreign investors must obtain specific authorization to purchase land along borders. Brazil should privatize state-owned enterprises, such as Petrobras, and open Brazil to more foreign equity participation to develop its rich resources and improve its score in the Index of Economic Freedom . Petrobras will need significant funding in order to develop the billions of barrels of pre-salt oil and natural gas that lie beneath as many as 10 kilometers of water, rock, and salt under Brazils South Atlantic continental shelf. Despite its profitability and high market value, states The Economist . the company lost some US50bn in market value in JanuaryAugust 2010 due to rising debt levels, although by May 2012 oil output was back up.50 Recently, Petrobras increased its five-year investment planalready the worlds largest corporate spending programto 237 billion.51 Yet Dr. Susan Kaufman Purcell, director of the Center for Hemispheric Policy at the University of Miami, recently noted that the Brazilian government is living in 2008, not 2013, when it comes to its policies to develop these pre-salt reserves. The biggest game-changer has been the tremendous U. S.-led advances in horizontal drilling and fracking technologies to extract oil from shale, which have reduced the estimated cost of producing a barrel of oil from shale to 70which is less than the cost of producing a barrel of oil from Brazils pre-salt reserves, which some analysts have placed at over 100 per barrel. Furthermore, shale exists in abundance. The largest deposits are in the United States, whose production of crude oil has increased 15 percent since 2008, making it the worlds fastest-growing oil and natural gas producer. The U. S. Energy Department projects that the daily U. S. output of oil could reach almost seven million barrels per day by 2020. Others think that it could ultimately hit 10 million barrels per day, which would place the United States in the same league as Saudi Arabia. Brazil currently produces about 2.5 million barrels per day of oil. The accessibility of oil from shale means that there will be abundant oil for years to come. This also means that world oil prices will continue to decline. Given this situation, Brazil needs to quickly begin reducing the cost of producing its pre-salt oil. Unfortunately, Brazil is going in the wrong direction, as the government continues to insist on demanding a high percentage of local content in the production of ships, drills and other assets needed to exploit its pre-salt reserves.52 In another sign of trouble for Brazil, new foreign investment in Brazilian equities plunged 70 percent in the first half of 2011, dragging down what had been one of the worlds most attractive markets for global investors.53 Although by December 2011 foreign investment had rebounded somewhat, a large portion of that new investment came from China Petroleum amp Chemical Corp. s purchase of a 40 percent share in Repsol, a domestic oil producer.54 In general, rising inflation, political interference in key sectors, and measures that slowed down credit growth have all dampened foreign investor sentiment toward Brazils equity market, forcing some companies to put off the initial public offering (IPO) of stock despite the overall strength of the countrys economy.55 Financial Freedom. Overall, Brazils well-regulated and supervised banking sector withstood the global financial turmoil of 2008 relatively well, and has expanded. It has become more competitive and diversified, although the states role remains significant. Loans to the private sector have steadily increased, with solid economic expansion and the formation of a new lower middle class. Public-sector commercial and development bank assets account for around 40 percent of the financial systems total assets. The two largest state-owned banks control about 25 percent of total assets, and the government directs banks to channel loans to preferred sectors. Three of the top 10 banks are now foreign-owned. Brazils insurance sector is now South Americas largest, and the reinsurance market was opened to private-sector competition in 2008. The domestic insurance and pension-fund sectors are important institutional investors in local capital markets. The sector is expected to continue to deepen as the domestic economy expands and real incomes of the middle class rise. The operating networks of non-bank financial institutions, however, continue to be underdeveloped. According to the World Economic Forums 2011 Global Competitiveness Report56 Brazil improved five places to rank 53rd overall due in part to having one of the worlds most efficient financial markets (40th place) and one of the highest rates of technological adoption (47th place) and innovation (44th place) in Latin America and the Caribbean. In order for the middle class in Brazil to grow, and entrepreneurs to succeed in starting and growing small and medium-sized businesses, the Brazilian government must reverse the countrys inadequate mechanisms for long-term financing. Public-sector bank assets accounted for 41.5 percent of total banking assets at end-June 2010, according to the central bank ( Banco Central do Brasil ).57 Despite the surge in lending by state-owned banks, the private sector still lacks access to long-term financing opportunities. The average annual market rate on bank loans was 35.4 percent in July 2010, significantly higher than the subsidized long-term interest rate (TJLP) of 6 percent.58 Despite well-intentioned efforts, the Brazilian Development Bank (BNDES) may very well be encouraging mal-investment and distorting market signals. BNDES enjoys preferential access to lower interest rates, cheaper credit, and government backing that private banks do not. Thus BNDESbacked by the deep pockets of the governmentthreatens to monopolize the credit market and obstruct competition among private free-market banks. This obstruction inhibits the only effective way to ensure optimal credit allocation.59 The rise of BNDES under Lula and Rousseff is fraught with moral hazard, not unlike the one in the United States involving U. S. government-sponsored enterprises (GSE) and mortgage industry heavyweights Fannie Mae and Freddie Mac. Conclusion Brazils progress the past two decades led Goldman Sachss Jim ONeill10 years after including Brazil in his BRICs formulation in 2001to conclude that his big, bold bet to include Brazil in the BRICs had been vindicated.60 Brazilians were finally going to shake off their old habits and turn their country into a world-class power. Notwithstanding ONeills cheery assessment in 2011, however, there have been numerous negative developments since Dilma Rousseff took the reins from Lula that same year. Stalling economic growth, higher inflation, growing regulation, and possible moves toward renationalization of some key sectors of the economy (such as mining and energy production), as well as numerous government corruption scandals, are raising old questions. Is Brazil back sliding Can Brazil ever permanently escape from its perennial trap of high inflation, due in part to the Dutch disease of overdependence on commodity exports Is Brazil fated to be the perennial country of the future As ONeill himself notes, If we look back 100 years, the majority of the successful world economies were not tied to commodities.61 Brazil needs to shake itself loose from its dependence on exporting commodities to China, no matter what happens with the PRCs own economic development. Chinas current statist model should not be emulatedit is Chinas earlier market-reform era that should be emulated. President Rousseffs government should implement the necessary structural reforms to spur growth in non-commodity sectors by further privatization (especially in infrastructure) and by eliminating barriers to entrepreneurial activity, burdensome taxes, inefficient regulation, flaws in long-term financing, and rigidities in the labor market. - James M. Roberts is Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics (CITE), Mark J. Schreiber is Associate Director for Strategy and Finance, and Derek Scissors, Ph. D . is Senior Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation. CITE Research Assistant Ryan Olson and CITE intern Dylan DelliSanti made valuable contributions to this paper. 1 Such as the other so-called BRIC countries (Brazil, Russia, India, and China) and other large developing countries, such as Indonesia and South Africa. 2 In the 1960s, the Netherlands discovered large natural gas deposits. This ostensibly positive development had serious repercussions for important segments of the economy, as the Dutch guilder became stronger, making Dutch non-oil exports less competitive. This phenomenon has come to be known as the Dutch disease. Christine Ebrahim-zadeh, Back to Basics, International Monetary Fund Finance and Development . Vol. 40, No. 1 (March 2003), imf. orgexternalpubsftfandd200303ebra. htm (accessed August 7, 2012). 3 AQ and Efecto Nam Joint Report: Is Brazil Ready for the Olympics Americas SocietyCouncil of the Americas, August 5, 2012, as-coa. orgarticlesaq-and-efecto-naC3ADm-joint-report-brazil-ready-olympics (accessed August 16, 2012). 5 Mamta Badkar, Brazils 66 Billion Stimulus Could Signal a Shift in Its Growth Strategy, Business Insider , August 15, 2012, businessinsiderbrazil-66-billion-dollar-stimulus-2012-8 (accessed August 16, 2012). 8 Albert Fishlow, Starting Over: Brazil Since 1985 (Washington, DC: Brookings Institution, 2011), p. 9. 10 Lourdes Sola, Politics, Markets, and Society in Lulas Brazil, Journal of Democracy . Vol. 19, No. 2 (2008), pp. 3234. 11 The World Bank, Conditional Cash Transfers: Key Facts, 2011, web. worldbank. orgWBSITEEXTERNALTOPICSEXTSOCIALPROTECTIONEXTSAFETYNETSANDTRANSFERS0,,contentMDK:20615138 theSitePK:282761,00.html (accessed June 20, 2012). 12 Sola, Politics, Markets, and Society in Lulas Brazil. 13 Neo-developmentalism was first used in 2003 by Brazilian economist and former policymaker Luiz Carlos Bresser-Pereira in an attempt by statists to oppose the neo-liberal policies of the Washington Consensus. See A New Developmental State Heterodox Political Economy Blog . April 14, 2012, europeaneconomics. wordpress20120424a-new-developmental-state (accessed August 8, 2012). 14 Mara de Lourdes R. Mollo and Alfredo Saad-Filho, Neoliberal Economic Policies in Brazil (19942005): Cardoso, Lula and the Need for a Democratic Alternative, New Political Economy . Vol. 11, No. 1 (2006), p. 117. 15 Fishlow, Starting Over: Brazil Since 1985 . 16 Derek Scissors, China Drowning in Money: What It Means for the U. S., Heritage Foundation Issue Brief No. 3616, May 29, 2012, thfmedia. s3.amazonaws2012pdfib3616.pdf . 18 Brazil Sets Trade Records, Due to Chinese Demand, NPR, January 2, 2012, npr. org20120102144587105brazil-sets-trade-records-due-to-chinese-demand (accessed August 8, 2012), and John Whalley and Dana Madianu, The Deepening China Brazil Economic Relationship, CESIFO Working Paper No. 3289, December 2010, cesifo-group. deportalplsportaldocs11183998.PDF (accessed August 8, 2012). 19 Leslie Hooks, China: Beijing Will Drive Global Natural Gas Demand, The Financial Times . December 20, 2011, and Jikun Huang, Feeding Growing Food Demand in China, presentation at SAIS conference, Washington, DC, April 17, 2012, sais-jhu. eduagriculturePresentation201Jikun20HuangChina. pdf accessed August 8, 2012). 21 Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2012 Index of Economic Freedom (Washington, DC: The Heritage Foundation and Dow Jones amp Company, Inc. 2012), pp. 121122. 22 U. S. Department of State, Background Note: Brazil, November 30, 2011, state. govrpaeibgn35640.htm accessed August 8, 2012). 24 The World Bank, Enterprise Surveys: Brazil, 2009, enterprisesurveys. org accessed June 21, 2012). 27 Tina Sreide and Claudio Weber Abramo, Collaboration on Anti-Corruption: Norway and Brazil, Chr. Michelsen Institute CMI Report No. 2008:1, 2008, cmi. nopublicationsfile2935-collaboration-on-anti-corruption-norway-and-brazil. pdf accessed August 8, 2012). 29 International Monetary Fund, World Economic Outlook Database, April 17, 2012, imf. orgexternalnscs. aspxid28 accessed August 8, 2012). 30 Brazil Investment Regulations, Economist Intelligence Unit, October 4, 2011. 31 Doing Business, Ease of Doing Business in Brazil, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomiesbrazil accessed August 8, 2012). 32 Doing Business, Ease of Doing Business in China, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomieschina (ccessed August 8, 2012). 33 Kate OSullivan, Brazil is Booming (and Maddening), CFO Magazine . July 15, 2010, cfoprintablearticle. cfm14508833 (accessed August 8, 2012). 34 Jonathan Wheatley and John Paul Rathbone, Brasileiros no parecem desejar mudanas polticas, mas empresrios esto preocupados (Brazilians Do Not Seem to Want Political Change, But Employers are Concerned), in Portuguese, UOL, January 10, 2010, wap. noticias. uol. brmidiaglobalfintimes20101001brasileiros-nao-parecem-desejar-mudancas-politicas-mas-empresarios-estao-preocupados. htm (accessed July 5, 2012). 35 Tick, Tock: The Senate Debates a Small Measure to Help Disarm an Economic Time Bomb, The Economist . March 24, 2012, economistnode21551093 (accessed August 20, 2012). At the March 2012 exchange rate, 622 reals were worth about USD300. 38 Doing Business, Economy Rankings: Ease of Doing Business in Brazil, 2012, doingbusiness. orgrankings (accessed August 8, 2012). 40 Doing Business, Ease of Doing Business in Brazil. 41 Doing Business, Ease of Doing Business in New Zealand, International Finance Corporation and The World Bank, 2012, doingbusiness. orgdataexploreeconomiesnew-zealand (accessed August 8, 2012). 42 Doing Business, Ease of Doing Business in China. 46 Monica Rebelo Rodriguez and Saul B. Suslick, An Overview of Brazilian Petroleum Exploration Lease Auctions, Terrae . Vol. 6, No. 1 (2009), pp. 620 , 47 Prada, For Brazil, Its Finally Tomorrow. 48 The World Bank, Brazil: Trade-at-a-Glance Table, World Trade Indicators 200910, info. worldbank. orgetoolswtidocsBraziltaag. pdf (accessed August 8, 2012). 50 Brazil: State Role in the Economy, Economist Intelligence Unit, September 1, 2010, country. eiuarticle. aspxarticleid1307475115 (accessed August 8, 2012). 53 Samantha Pearson, Foreign Investment in Brazil Market Dives 70, The Financial Times . July 26, 2011. 54 Kenneth Rapoza, Brazil at Risk of Becoming One Big Petrobras, Forbes . February 2, 2012. 55 James Lord, Brazils Equity Market Runs Risk of Overheating, The Financial Times . 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